SUMMER INTERNSHIP PROJECT REPORT

RATIO ANALYSIS
OF
DABUR INDIA LIMITED

SUBMITTED TO:

Mr.R.S.Dani
Additional General Manager of Internal Affairs
Dabur India Limited

SUBMITTED BY:

Richa Baranwal
Institute of Marketing & Management (IMM)
New Delhi
 UNDERTAKING

Debt can not be paid in words of gratitude

All successful projects start and end with the help of many people. My
project is no exception. I have profound pleasure I expressing my deep sense of
gratitude and feeling to Mr.R.S.Dani, additional general manager of internal affairs
(Dabur India Limited) for giving me this project and a unique opportunity to
contribute something to FMCG industry and also to enhance my knowledge. The
project was a learning experience which promises to help me in future.

During the training period of my project, I met and interacted with several
customers. I take the opportunity to thank them for their co-operation and active
participation in my project, especially executives and staff member of Dabur India
Limited. I also want to thank to all other friends who directly or indirectly gave me
a helping hand in completing this project report by sparing their valuable time.

Beside this, I want to give my sincere gratitude to Mr. Jagjit Singh, (Executive
President, IMM) deep sense of gratitude and special thanks to Mrs.Moli Lal
(Education Advisor, IMM) and all other faculties of IMM campus under whom
timely guidance I have been able to complete this project successfully.

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 TABLE OF CONTENTS
Executive Summary 5-6
Objectives of the Study 7
Methodology 8
Introduction of FMCG Industry 9-10
History of FMCG Industry 11-14
Introduction to the company 15
Ratio Analysis 16-17
Ratio comparison of Dabur with other 18
FMCG Companies
Liquidity Ratios 19
Leverage Ratios 23
Profitability Ratios 29
Activity Ratios 43
Ratio Analysis of Dabur India Ltd. 53
Findings 64
Conclusions and Recommendation 65
SWOT analysis 66
Limitations 67
Appendices 68
Bibliography 72

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 LIST OF TABLES, CHARTS AND FIGURES
Ratio Comparison of Dabur with other FMCG Companies
18
Liquidity Ratios 19
Current Ratio 20-21

Leverage Ratios 23
Debt Equity Ratio 24-25
Long Term Debt Equity Ratio 26-27
Profitability Ratios 29
Gross Profit Margin 30-31
Net Profit Margin 32-33
Return on Capital Employed 34-35
Return on Net Worth 36-37
Operating Profit Margin 38-39
Profit Before Interest and Tax Margin 40-41
Activity Ratios 43
Inventory Turnover Ratio 44-45
Debtors Turnover Ratio 46-47
Fixed Assets Turnover Ratio 48-49
Total Assets Turnover Ratio 50-51

Ratio Analysis of Dabur India Ltd.( 53

Current Ratio 54
Debt Equity Ratio 55
Long Term Debt Equity Ratio 56
Gross Profit Ratio 57
Net Profit Ratio 58
Return on Capital Employed 59
Return on Net Worth 60
Debtors Turnover Ratio 61
Average Collection Period 62
Fixed Assets Turnover Ratio 63

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5
 EXECUTIVE SUMMARY
The project Ratio Analysis: A Case Study of Dabur. Aims to interpret the financial

statement so that the strengths and weaknesses of a firm as well as its historical performance and

current financial condition can be determined.

For the purpose the data has been used, which was collected from the past financial

records of the company i.e., balance sheet and profit and loss account, for three financial

years(2003-04, 2004-05, 2005-06). The data collected broadly relate to the current assets and

current liabilities of the company.

The technique used to analyze the financial condition of the company is Ratio Analysis.

For this purpose three years (2003-2004, 2004-2005 &2005-2006) ratios have been calculated of

Dabur and out of them two years (2003-2004 &2004-2005) ratios have compare with other

FMCG companies. The method of trend ratios has been adopted. The analysis process has been

undertaken in two stages:

a) Calculation of ratios

b) Their interpretation

The following ratios have been calculated:

a) Liquidity Ratios

The liquidity ratios represent excess of current assets over current liabilities. It is the

ability of a firm to satisfy its short-term obligations as they become due.

b) Leverage Ratios

The leverage ratios measure the ratios of long-term or total debt to shareholders equity.

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c) Profitability Ratios

The profitability ratios use to measures operating efficiency of a firm and its ability to

ensure adequate returns to its shareholders depends ultimately on the profits earned by it.

d) Activity Ratios

The activity ratios measure the speed with which various accounts/assets are converted

into sales or cash.

After making all the calculations each ratio has been interpreted and this can be

summarized as follows:

The net working capital of the company shows an increasing trend. The analysis also

reveals a rising inventory turnover ratio and debtors turnover ratio and an improved debt

collection period. At the same time the company also has a high current asset and quick ratio,

which represents high liquidity.

The project also gives information about the practices presently being followed in Dabur
to manage their ratios. After making a thorough analysis of the various aspects related to the
ratios the company conclusion has been drawn. The company has sufficient funds to meet its
short-term obligations as they become due.

Finally on the basis of the analysis and the conclusions drawn a SWOT analysis has been

done and recommendations given.

Therefore, a financial analysis of the working capital of Dabur reveals that the company

has been able to manage its working capital efficiently thereby strengthening its short-term

financial position.

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 OBJECTIVES OF THE PROJECT

OBJECTIVES:

Finding out the ground realities of the competitors of Dabur

India Limited.
Analyzing the superiority of Dabur over its competitors.
Analyzing the position of Dabur in the minds of customers.
Finding out the Ratio Analysis and procedures of calculation.

DELIVERABLES:

Identified the competitors in the market.

Identified opportunities: new segment and consumer needs.
Identified the problem faced by Dabur India Limited
consumers.
Identified the rules and regulation.
Recommendation

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 METHODOLOGY

The project work has done in two parts:

1) Calculation of ratios
2) Explain with graph
3) Their interpretations

1) Calculation of Ratio- To analysizing the financial condition of the

company, Dabur India Limited, different ratios has been calculated
of different FMCG companies on the basis of available data. The
ratios has been calculated on yearly basis, of three years (2003-2004,
2004-2005 & 2005-2006).

2) Explain with graph- After calculating the ratios, the data has shown
in graphs, in order to explain it.

3) Interpretations- After calculating the ratios and showing it in

graphs, the interpretation has been made of each and every ratios.
This helps to analysizing the financial condition of the company.

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 INTRODUCTION OF FMCG INDUSTRY
Fast Moving Consumer Goods is the booming industry in India. After all, it is an industry
which touches every aspect of human life, from looks to hygiene to palate. Though the market
scenario was very different before the liberalization of Indian economy the product quality as
well as the competitiveness has immensely increased. After the liberalization the players like
Pepsi and Coke has changed the rules of the game in the industry. One reason for the lagging
behind of this industry was the spending power of people, the other reasons were like lack of
innovation because of the closed market having high import duties, and the minuscule level of
competition as their were not many players in the market. Earlier it was the sales era but at
present customer has the final call.

Categorization of FMCG Products

Category Products
Household Care Fabric wash (laundry soaps and synthetic
detergents), household cleaners (dish/utensil
cleaners, floor cleaners, toilet cleaners, air
fresheners, insecticides and mosquito repellents,
Metal polish and furniture polish).

Food and Health beverages, soft drinks, staples/cereals,

Beverages bakery products (biscuits, bread, cakes), snack
food, chocolates, ice cream, tea, coffee, soft
drinks, processed fruits, vegetables, dairy
Products, bottled water, branded flour, branded
rice, branded sugar, juices etc.

Personal Care Oral care, hair care, skin care, personal wash
(soaps), cosmetics and toiletries, deodorants,
Perfumes, feminine hygiene, paper products

Industry Segments

The main segments of the FMCG sector are:

Personal Care: oral care; hair care; skin care; personal wash (soaps); cosmetics and
toiletries; deodorants; perfumes; paper products (tissues, diapers, sanitary); shoe care.
Major companies active in this segment include Hindustan Lever; Godrej Soaps, Colgate-
Palmolive, Marico, Dabur and Procter & Gamble.

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 Household Care: fabric wash (laundry soaps and synthetic detergents); household
cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides
and mosquito repellants, metal polish and furniture polish).

Major companies active in this segment include Hindustan Lever, Nirma and Reckitt &
Colman.

Branded and Packaged Food and Beverages: health beverages; soft drinks;
staples/cereals; bakery products (biscuits, bread, cakes); snack food; chocolates; ice
cream; tea; coffee; processed fruits, vegetables and meat; dairy products; bottled water;
branded flour; branded rice; branded sugar; juices etc.

Major companies active in this segment include Hindustan Lever, Nestle, Cadbury and
Dabur.

Spirits and Tobacco Major companies active in this segment include ITC, Godfrey
Philips, UB and Shaw Wallace.

An exact product-wise sales break up for each of the items is difficult.

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 HISTORY OF FMCG INDUSTRY
Fast moving consumer goods (FMCG) industry has a long history. However, the Indian
FMCG industry began to take shape only during the last fifty-odd years. To date, the Indian
FMCG industry continues to suffer from a definitional dilemma. In fact, the industry is yet to
crystallize in terms of definition and market size, among others.

The definitional confusion that has marked the Indian FMCG industry is getting
confounded. Some call it the FMCG industry, some others call it the CPG industry and some
even call it the PMCG (Packaged Mass Consumption Goods) industry. The Indian FMCG
industry has suffered because of this confusion.

It was Dabur, which kick started in India what's today known as the fast moving
consumer goods (FMCG) industry. It was some 115 years ago, much before Hindustan Lever
(HLL) materialized on the scene. How has the FMCG industry metamorphosed in India?

The dramatic nineties

Things however began to change post-reforms during the nineties. The floodgates were
opened. And MNCs with saturating home-markets who were hungrily looking for markets
elsewhere rushed in. Categories within categories were created in products such as hair-oil and
skincare, and many new product categories were also created. Untouched facets of the Indian
consumer were explored. The FMCG players had in front of them not only a vast untapped
market but also a market that was fast growing. Income-levels were rising. A new class of
upwardly mobile was emerging. Television and, satellite and cable television were helping the
market to grow further in rural areas by changing aspirations and lifestyles.

The canvas did widen for the FMCG players, but so did the challenges. Rules of the game
changed. Strategies, in their true sense, came to the fore. Quite unlike in the past, companies
began looking for ways to expand their product-portfolios and distribution reach. Acquisition of
brands became the order of the day as it gave the players easy options of attaining growth in the
FMCG sector. That is true of the MNCs who are known for their deep pockets.

Dabur, for instance unleashed brands in a way it had never done earlier. Just in a span of
ten years, it gobbled up Food products, Health Care Products, was bought in the market. Dabur
plan to increase the distribution channel although it already have good distribution channel.

Current Scenario in FMCG

At present the industry is on a roll. Following are some industry stats which prove it:

The FMCG sector is the fourth-largest sector in the Indian economy

At present the size of the industry is US $13.1 billion
The industry is expected to grow at compounded rate of 9 % per annum
The growth in the urban sector is 7% and in rural sector is 4%

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 The top five companies HLL, ITC, Dabur, Britannia and Nestle of FMCG industry has
grown at the rate of 15% this year.
The combined performance chart for the year 2004 and 2005 of these companies is as
following:

(Rs m) Sept'04 Sept'05 Change

Net Sales 58,822 67,813 15.3%
Expenditure 45,316 52,632 16.1%
Operating Profit (EBDIT) 13,506 15,181 12.4%
Operating Profit Margin (%) 23.0% 22.4%
Other Income 1,940 1,931 -0.5%
Interest 782 297 -62.0%
Depreciation 1,370 1,545 12.8%
Profit before Tax 13,294 15,270 14.9%
Tax 3,714 4,066 9.5%
Extraordinary items 427 (62)
Profit after Tax 10,007 11,142 11.3%

Future of the Industry

Looking at the steps taken by the government to improve the picture of Indian industry we
can say that there are immense growth opportunities for this sector. Following are some of the
facts related to the bright future of this industry:

The industry is expected to grow up to the size of US $33.4 billion. by the year 2015
The demand for FMCG products is expected to boom by 60% in 2007 and 100% by 2015
In the next few decades the production of foods by PMCG is expected to rise up to 70%
from its current share of 11%
Opening up of the retail sector for FDI. Currently the FDI in retail is 24% it may be
further increased as looking at the growth rate of the industry in 2010 the industry is
expected to need an investment of US $28 billion
Government encouraging the export of FMCG products by reducing the export duty
The per capita disposable income in India is expected to rise from US $556 in 2003 to US
$1150 in 2015, which means the increase in purchasing power. It will lead to the growth
in the sales of products like health care.
India is the worlds largest producer of milk still only 15% of the milk is processed, a
huge potential of growth lies in this segment of the industry.

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 Currently the size of semi processed and ready to eat packaged food market is $70 billion
which is the 15% of its potential, this part of FMCG also have an immense growth
potential.
By 2010, 200 million people are expected to shift to packaged and processed food
There is only 45% penetration in the health care market and 55% of the market is still to
be covered in this market.
If we look at the distribution of Indian population around 47% of Indian population is
below 20 years of age by 2015 which is expected to grow to 55% which means the
consumer base of FMCG products like healthcare, hygiene, beverages etc will increase
The rural market in India was not well penetrated by the FMCG industry till now but with
the projects like HLL Shakti and ITC E-Chaupal the penetration has increased and this
will lead to faster growth of this industry
The emergence of the concept of ECR (Efficient Consumer Response) will the FMCG
industry operate more efficiently by filling up the demand supply gap which coming up a
major problem in this industry.

Environmental Factors affecting the Industry

There are various factors at Micro as well Macro level which influences the FMCG industry.
The factors at micro level can be costs incurred in production, efficiency of the various
departments in the companies of FMCG industry. At macro level following are the factors
influencing FMCG industry:

Economic Growth as it will lead to increase in the income of the people and so the
expenditure on FMCG products
Changes in demographic profile of people
Government policies like :
o Tax
o FDI policies
o Export Duties

Entry of new players in the market as it rises the competition and leads to various
changes in the way business is done
The competition faced from unorganized sector as they get away without paying taxes
and can have the competency at the price level

Role of Dabur in this Industry

Dabur Foods Limited (DFL) posted a record 53% sales growth for the financial year
2005-06. This outstanding performance has resulted in DFL closing the year at Rs.190 crores
(balance sheet figure) and this strong growth is reflected in the incremental turnover of Rs. 12.1
crores over budget and Rs. 61.5 crores over last year.
The company recorded a PAT of Rs. 12.1 crores, which is 130.2% growth over LY and as a result
PAT % to sales moved from 4.5% to 6.8%.

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 Some of the key Highlights of the Year are:

Company earned additional revenue to the tune of Rs. 15 crores through its export operations,
which is a 260% growth over LY and achieved the recognition of a Star Export House in 2 years.
New products launches have contributed to 20% of the turnover and contributed to 24%
of our growth.
Real and Activ Brands together have clocked a turnover of Rs. 150 crores.
Replant of Activ has resulted in value sales of Rs 3040 lakhs resulting in a stupendous growth of
99% over last year and increased contribution from 13% to 17% of SBU sales.

Dabur Foods Limited (DFL) a wholly owned subsidiary of Dabur India Limited (DIL),
operates on the naturals platform with a product portfolio consisting mainly of packaged fruit
juices, cooking pastes, sauces and items for institutional food purchases

The business registered another year of fantastic performance in 2005-06 by growing

sales by 48% and growing its profit by more than two times. This is the second year in a row that
the business has grown over 48% in sales growth. The business recorded a turnover of Rs.192.53
crores registering a growth of 48% and profit after tax of Rs.12.1 crores. In line with the strategic
path laid down, the following are the key highlights of performance:

Beverage portfolio growth at 50% driven by its segmentation strategy under Real.
Strong growth from new product launches and new channels which contributed to 24%
of our total growth.
The line extensions of Home made also continued to drive the growth.
Exports grew by over 100%.

The primary growth driver of your business was its fruit beverage portfolio. The
segmentation strategy put into place by Sanjay and his team to differentiate the 3 brands has
been successfully implemented. Real, Activ and Coolers are now differentiated in terms of
appeal, benefit, variants and packaging. Real continued to grow by over 35%. The major success
of the year was Real Activ which doubled it's sales over last year. The extension to the
innovative fruit and vegetable variants has been widely accepted by the Indian consumers. Both
these brand have firmly strengthen Dabur Foods leadership in the fruit juices market coupled
with the excellent retail distribution by KG and his team.

"Coolers" - The range of drinks is based on traditional Indian formulations, which have a
cooling effect on the body - grew by 58%. It added 3 new flavors - Muskmelon, Lemon Barley
and Jamun.

The Home made brand grew by 28 per cent in 2005-06. These growth rates were possible
by the excellent performance of Coconut Milk & Tomato Pure.

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 Besides the retails channel, the product is extensively distributed in the food services
channel. In view of the growing size of this channel a dedicated structure headed by Jyotiroop
has been set up to service the customer. The company continued to dominate this channel by
making it available in the best hotels, restaurants, airlines and several institutions like business
houses to Indian army.

INTRODUCTION OF A COMPANY

Dabur India Limited established in 1884 by Dr. S. K. Burman, physician of vision and
limitless compassion Brought Ayurvedic medicines to the ailing mass of Bengal. It is one of the
leading FMCG Company in India. The company was formed by way of amalgamation in Oct.'86.
Prior to this, the company was operating under the name Dabur (S K Burman) Pvt Ltd, since
1930. The FMCG industry in India is very unpredictable which ultimately affects the
profitability of any company in the sector.

The success of Dabur is based on dedication to nature, corporate, and process hygiene,
dynamic leadership and commitment to the partners and stakeholders. It provides differentiated
products with strong Herbal and Nature profile. Over more than 100 years it is dedicated to
providing nature based solution for a healthy and holistic lifestyle through Ayurveda.

Leading consumer goods Company in India, holding position among the large turnover
companies:

3 major strategies business units (SBU) - Family Product Division (FPD), Health Care
Products Division (HCPD), and Dabur Ayurvedic Specialties limited (DASL).
5 Subsidiary Group Companies Dabur Foods, Dabur Nepal, Dabur Oncology, Dabur
Pharma and Dabur Egypt.
Production market in over 50 countries.
Dabur became the first Ayurvedic products company to get ISO 9002 certification for its
superior quality standards.
Dabur Nepal, a subsidiary of Dabur India, has set up fully automated greenhouses in
Nepal. This helps to produce saplings of rare medicinal plants that are under threat of
extinction due to ecological degradation.

The company has various brand leaders in different market segments -- Dabur
Chyawanprash, a health tonic and Hajmola, a digestive tablet,. Two new brands, Real and Home
made, launched during 1996-97 have also carved out a niche in the market. Dabur added a new
variant to its Pudin Hara range. Its key pharmaceutical brand New Livfit recorded a growth of
more than 100%.

To compete in the market and to retain its position, company is focusing on different
strategies and taking initiative for efficiency:

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17
 RATIO ANALYSIS

Ratio analysis is an excellent method for determining the overall financial condition of a
business. It puts the information from a financial statement into perspective, helping to spot
financial patterns that may threaten the health of a company.

Ratios are also very useful for making comparisons between our business and other
businesses in same industry. For example, comparing ratios can indicate whether a business is
holding too much inventory or collecting receivable too slowly. This comparison provides a
window into ways in which our business can improve its operations.

The Balance Sheet and the Statement of Income are essential, but they are only the
starting point for successful financial management. Apply Ratio Analysis to Financial Statements
to analyze the success, failure, and progress of our business.

Ratio Analysis enables the business owner/manager to spot trends in a business and to
compare its performance and condition with the average performance of similar businesses in the
same industry. To do this compare your ratios with the average of businesses similar to yours and
compare your own ratios for several successive years, watching especially for any unfavorable
trends that may be starting. Ratio analysis may provide the all-important early warning
indications that allow you to solve your business problems before your business is destroyed by
them.

It is also a tool possesses several important features. The data, which are provided by
financial statements, are readily available. The computation of ratios facilitates the comparison
of firms which differ in size. Ratios can be used to compare a firm's financial performance with
industry averages. In addition, ratios can be used in a form of trend analysis to identify areas
where performance has improved or deteriorated over time.

It is based upon accounting information, its effectiveness is limited by the distortions

which arise in financial statements due to such things as Historical Cost Accounting and
inflation. Therefore, Ratio Analysis should only be used as a first step in financial analysis, to
obtain a quick indication of a firm's performance and to identify areas which need to be
investigated further.

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Conditional Use of Financial Ratio Analysis: Financial ratio analysis is frequently used to
measure the performance of various sectors of a business. If properly used (its limitations
understood), it can be a very useful management aid. Following are a few reasons why ratio
analysis is being used so extensively:

a) Ratios are easy to calculate - Most ratios compare two statistics which are normally
provided in the income statement or the balance sheet. Because these data are readily
available at a more-or- less fixed cost, not much time or expense is required to
compute a ratio.

b) Ratios allow easy comparison - They allow comparison of a firms past with its
present performance, as well as comparisons between similar firms at one time.

c) Ratios are easily understood - Not all members of the management team are financial
sophisticates and ratios provide simple overview information to all types of
management personnel.

d) Ratios communicate a firms financial position- The ratios communicate a firms financial
position to interested parties outside of management - for example, financial authorities may
rely on ratios to determine a firms credit worthiness.

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RATIO COMPARISON
OF
DABUR
WITH OTHER
FMCG COMPANIES

20
Liquidity Ratios

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STATEMENT SHOWING CURRENT RATIO AS ON 31ST MARCH 2004

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Current 1.27 0.90 0.67 0.68 1.24 0.89 1.12 1.71
Ratio

Current Ratio= Current Assets/Current Liabilities

INTERPRETATION:

The ratio is used to assess the short term financial position of the business concern. It is
an indicator of the firms ability to meet its short-term obligations. As a conventional, rule a
current ratio of 2:1 is considered ideal.

Dabur has a current ratio is 1.27 which is an average ratio that the company current assets
are more then current liabilities in year 2003-04 increase in current assets and decrease in current
liabilities. The company has a sufficient fund to pay its liabilities on time and meet other day to
day expenses.

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 STATEMENT SHOWING CURRENT RATIO AS ON 31ST MARCH 2005

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Current 0.79 0.82 0.65 0.66 0.91 0.86 1.29 1.52
Ratio

Current Ratio= Current Assets/Current Liabilities

INTERPRETATION:

The ratio is used to assess the short term financial position of the business concern. It is
an indicator of the firms ability to meet its short-term obligations. As a conventional, rule a
current ratio of 2:1 is considered ideal.

Dabur has a current ratio is 0.79 which is far away from the ideal ratio that the company
current assets are very less then current liabilities in year 2004-05 decrease in current assets and
increase in current liabilities.The company dont have a sufficient funds to pay its liabilities on
time and meet other day to day expenses.

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 Criteria for Analyzing Liquidity Ratios

The liquidity ratios measure the ability of the company to meet its current obligations.
The liquidity ratios by establishing a relationship between cash and other current assets to current
obligation provide a quick measure of liquidity.

Current Ratio: - The current ratio of 2:1 or more is considered satisfaction. Dabur India limited
has the current ratio 1.27 in the year 2003-2004 and 0.79 in the year 2004-2005 therefore it may
be interpreted to be sufficiently liquid. But among all the companies Dabur has secured 2 nd rank
in the year 2003-2004 and 6th rank in the year 2004-2005. The current ratio represents a margin
of safety for creditors. The higher the current ratio, the greater the margin of safety.

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Leverage Ratios

25
STATEMENT SHOWING DEBT EQUITY RATIO AS ON 31ST MARCH 2004

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Debt Equity 0.22 0.75 0.02 0.48 0.03 0.24 0.02 0.20
Ratio

Debt Equity Ratio = Long-term Loans\ Shareholders Fund

INTERPRETATION:

The debt-equity ratio is an important tool of finance analysis to appraise the financial
structure of the firm. It has important from the viewpoint of creditors, owner and the firm itself.
The ratio reflects the relative contribution of creditors and owners of the business in its
financing.
A high ratio shows a large share of financing by the creditors of the firm; a low ratio
implies a small claim of creditors. The debt-equity ratio indicates the margin of safety to the
creditors.
The shareholders of the firm would, however stand to gain in two ways: (i) with a limited
stake, they would be able to retain control of the firm and (ii) the return to them would be
magnified. With a larger proportion of debt in the financial structure, the earnings available to the
owner would increase more than proportionately with the increase in the operating profits of the
firm.

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STATEMENT SHOWING DEBT EQUITY RATIO AS ON 31ST MARCH 2005

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Debt Equity 0.15 0.35 0.03 0.33 0.02 0.05 0.03 0.19
Ratio

Debt Equity Ratio = Long-term Loans\ Shareholders Fund

INTERPRETATION:

The debt-equity ratio is an important tool of finance analysis to appraise the financial
structure of the firm. It has important from the viewpoint of creditors, owner and the firm itself.
The ratio reflects the relative contribution of creditors and owners of the business in its
financing.
A high ratio shows a large share of financing by the creditors of the firm; a low ratio
implies a small claim of creditors. The debt-equity ratio indicates the margin of safety to the
creditors.
The shareholders of the firm would, however stand to gain in two ways: (i) with a limited
stake, they would be able to retain control of the firm and (ii) the return to them would be
magnified. With a larger proportion of debt in the financial structure, the earnings available to the
owner would increase more than proportionately with the increase in the operating profits of the
firm.

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 STATEMENT SHOWING LONG TERM DEBT EQUITY RATIO AS ON 31ST MARCH 2004

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

LLong Term 0.17 0.63 0.00 0.35 0.01 0.06 0.01 0.85
Debt Equity
Ratio

Long Term Debt Equity Ratio= Long Term Debt

Long Term Debt + Shareholders Equity

INTERPRETATION:

The long term debt-equity ratio is also an important tool of finance analysis to appraise
the financial structure of the firm. Its again important from the viewpoint of creditors, owner
and the firm itself. The ratio reflects the relative contribution of creditors and owners of the
business in its financing, but this time it has done for long term financing.
A high ratio shows a large share of financing by the creditors of the firm; a low ratio
implies a small claim of creditors. The long term debt equity ratio provides large number of debts
for the company. It increases the operating profit of a company.

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STATEMENT SHOWING LONG TERM DEBT EQUITY RATIO AS ON 31ST MARCH 2005

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Long Term 0.11 0.30 0.00 0.17 0.01 _ 0.02 0.16
Debt Equity
Ratio

Long Term Debt Equity Ratio= Long Term Debt

Long Term Debt + Shareholders Equity

INTERPRETATION:

The long term debt-equity ratio is also an important tool of finance analysis to appraise
the financial structure of the firm. Its again important from the viewpoint of creditors, owner
and the firm itself. The ratio reflects the relative contribution of creditors and owners of the
business in its financing, but this time it has done for long term financing.
A high ratio shows a large share of financing by the creditors of the firm; a low ratio
implies a small claim of creditors. The long term debt equity ratio provides large number of debts
for the company. It increases the operating profit of a company.

29
 Criteria for Analyzing Leverage Ratios
The second category of ratios is Leverage Ratios; the solvency of a company can be examined
by using leverage ratios. Debt- equity ratio measure the ratio of long-term or total debt to
shareholders equity.

Debt Equity Ratio: - The relationship of lenders and owner describe the lenders and owners
contribution for each rupee of the owners contribution is called Debt equity ratio. The Dabur India
ltd. has debt equity ratio of 0.22 in the year 2003-2004 and 0.15 in the year 2004-2005 and by this
it has secured 4th rank in both years.

Long Term Debt Equity Ratio:- The long term debt-equity ratio is a important tool for financial
structure of the company. The percentage of this ratio shows the share of financing by the creditors
of the company. The dabur India ltd. has long term debt equity ratio of 0.17 in the year 2003-2004
and 0.11 in the year 2004-2005 and by this it has secured 4th rank in both years.

30
Profitability Ratios

31
STATEMENT SHOWING GROSS PROFIT MARGIN AS ON 31ST MARCH 2004

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Gross Profit 11.25 14.94 18.36 15.67 11.01 12.24 24.54 29.73
Margin

Gross Profit Ratio= Gross Profit* 100

Net Sales

INTERPRETATION:

Gross profit is the result of the relation between prices, sales volume and cost. A change
in the gross margin can be brought about by changes in any of these factors. The gross margin
represents the limit beyond which fall in sales prices are outside the tolerance limit. Further, the
gross profit ratio can also be used to determining the extent of loss caused by theft, spoilage,
damage, and so on in the case of those firms which follow the policy of fixed gross profit ratio in
pricing their products.
A very high and rising gross margin may be the result of unsatisfactory basis of
evaluation of stock, that is, overvalued of closing stock and undervalued of opening stock. But a
low gross margin is also a danger signal, warranting a careful, detailed analysis of the factors
responsible for it.

32
STATEMENT SHOWING GROSS PROFIT MARGIN AS ON 31ST MARCH 2005

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Gross Profit 14.35 14.90 19.89 17.30 12.55 12.57 25.82 26.21
Margin

Gross Profit Ratio= Gross Profit* 100

Net Sales

INTERPRETATION:

Gross profit is the result of the relation between prices, sales volume and cost. A change
in the gross margin can be brought about by changes in any of these factors. The gross margin
represents the limit beyond which fall in sales prices are outside the tolerance limit. Further, the
gross profit ratio can also be used to determining the extent of loss caused by theft, spoilage,
damage, and so on in the case of those firms which follow the policy of fixed gross profit ratio in
pricing their products.
A very high and rising gross margin may be the result of unsatisfactory basis of
evaluation of stock, that is, overvalued of closing stock and undervalued of opening stock. But a
low gross margin is also a danger signal, warranting a careful, detailed analysis of the factors
responsible for it.

33
STATEMENT SHOWING NET PROFIT MARGIN AS ON 31ST MARCH 2004

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Net Profit 8.82 11.01 10.62 11.82 5.22 6.95 11.50 16.03
Margin

Net Profit Ratio= Profit After Tax* 100

Sales

INTERPRETATION:

The net profit margin is indicative of managements ability to operate the business with
sufficient success not only to recover from revenues of the period, the cost of services, the
expenses of operating the business and the cost of borrowed funds, but also to leave a margin of
reasonable compensation to the owner for providing their capital at risk. The ratio of net profit
(after interest & taxes) to sale essentially expresses the cost price effectiveness of the operation.
A high net profit margin would ensure adequate return to the owner as well as enable a
firm to withstand adverse economic condition when selling price is declining, cost of production
is rising and demand for the product is falling. A low net profit margin has the opposite
implication.

34
 STATEMENT SHOWING NET PROFIT MARGIN AS ON 31ST MARCH 2005

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Net Profit 11.67 11.77 11.71 14.26 5.19 7.84 11.83 18.27
Margin

Net Profit Ratio= Profit After Tax* 100

Sales

INTERPRETATION:

The net profit margin is indicative of managements ability to operate the business with
sufficient success not only to recover from revenues of the period, the cost of services, the
expenses of operating the business and the cost of borrowed funds, but also to leave a margin of
reasonable compensation to the owner for providing their capital at risk. The ratio of net profit
(after interest & taxes) to sale essentially expresses the cost price effectiveness of the operation.
A high net profit margin would ensure adequate return to the owner as well as enable a
firm to withstand adverse economic condition when selling price is declining, cost of production
is rising and demand for the product is falling. A low net profit margin has the opposite
implication.

35
STATEMENT SHOWING RETURN ON CAPITAL EMPLOYED AS ON 31ST MARCH 2004

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Return on 29.50 44.11 116.05 121.79 17.05 34.69 17.14 92.73
Capital Employed

Return on Capital Employed = Net Profit (Before Tax & Interest)* 100
Average Capital Employed

INTERPRETATION:

The term capital employed refers to the long term funds supplied by the lenders and owner
of the firm. It is equal to non-current liabilities plus owners equity. Alternatively, it is equivalent
to net working capital plus fixed assets. Thus, the capital employed basis provides a test of
profitability related to the sources of the long term funds.

36
STATEMENT SHOWING RETURN ON CAPITAL EMPLOYED AS ON 31ST MARCH 2005

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Return on 49.70 56.62 134.90 158.03 22.95 44.37 37.33 104.52
Capital Employed

Return on Capital Employed = Net Profit (Before Tax & Interest)* 100
Average Capital Employed

INTERPRETATION:

The term capital employed refers to the long term funds supplied by the lenders and
owner of the firm. It is equal to non-current liabilities plus owners equity. Alternatively, it is
equivalent to net working capital plus fixed assets. Thus, the capital employed basis provides a
test of profitability related to the sources of the long term funds.

37
STATEMENT SHOWING RETURN ON NET WORTH AS ON 31ST MARCH 2004

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Return on 29.78 56.61 76.99 147.51 12.26 24.85 49.76 191.77
Net Worth

Return on Net Worth= Net Profit After Taxes- Preference Dividend* 100
Average Ordinary Shareholders Equity or Net Worth

INTERPRETATION:

This is probably the single most important ratio to judge whether the firm has earned a
satisfactory return for its equity holders or not. Its adequacy can be judged by (i) comparing it
with the past record of the same firm, (ii) inter-firm comparison, and (iii) comparisons with the
overall industry average. The rate of return on ordinary shareholders equity is of crucial
significance in ratio analysis vis--vis from the point of the owners of the firm.

38
STATEMENT SHOWING RETURN ON NET WORTH AS ON 31ST MARCH 2005

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Return on Net 48.79 64.05 91.92 186.66 12.58 28.95 52.31 116.25
Worth

Return on Net Worth= Net Profit After Taxes- Preference Dividend* 100
Average Ordinary Shareholders Equity or Net Worth

INTERPRETATION:

This is probably the single most important ratio to judge whether the firm has earned a
satisfactory return for its equity holders or not. Its adequacy can be judged by (i) comparing it
with the past record of the same firm, (ii) inter-firm comparison, and (iii) comparisons with the
overall industry average. The rate of return on ordinary shareholders equity is of crucial
significance in ratio analysis vis--vis from the point of the owners of the firm.

39
STATEMENT SHOWING OPERATING PROFIT MARGIN AS ON 31ST MARCH 2004

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Operating 11.91 16.14 18.39 16.14 11.28 12.65 13.37 12.73
Profit Margin

Operating Profit Ratio= Operating Profit * 100

Net sale

INTERPRETATION:

Operating profit margin indicates how effective a company is at controlling the costs and
expenses associated with their normal business operations. The operating margin is another
measurement of managements efficiency. It compares the quality of a companys operations to
its competitors. A business that has a higher operating margin than its industrys average tends to
have lower fixed costs and a better gross margin, which gives management more flexibility in
determining prices. This pricing flexibility provides an added measure of safety during tough
economic times.

40
STATEMENT SHOWING OPERATING PROFIT MARGIN AS ON 31ST MARCH 2005

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Operating 14.72 15.06 19.90 17.82 12.72 12.70 14.71 13.52
Profit Margin

Operating Profit Ratio= Operating Profit * 100

Net sale

INTERPRETATION:

Operating profit margin indicates how effective a company is at controlling the costs and
expenses associated with their normal business operations. The operating margin is another
measurement of managements efficiency. It compares the quality of a companys operations to
its competitors. A business that has a higher operating margin than its industrys average tends to
have lower fixed costs and a better gross margin, which gives management more flexibility in
determining prices. This pricing flexibility provides an added measure of safety during tough
economic times.

41
STATEMENT SHOWING PROFIT BEFORE INTEREST & TAX MARGIN AS ON 31ST
MARCH 2004

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Profit Before 10.54 15.02 16.32 14.43 7.45 11.13 14.02 13.66
Interest & Tax
Margin

Profit Before Interest & Tax Margin= Gross Profit Margin Depreciation

INTERPRETATION:

The profit which comes out after subtracting the depreciation from total profit is called
profit before interest & tax (PBIT). It shows the real position of a company, because interest &
tax is included in this figure which subtract later on.

42
STATEMENT SHOWING PROFIT BEFORE INTEREST & TAX MARGIN AS ON 31ST
MARCH 2005

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Profit Before 13.37 14.02 17.75 16.05 9.33 11.53 15.12 13.97
Interest &
Tax Margin

Profit Before Interest & Tax Margin= Gross Profit Margin Depreciation

INTERPRETATION:

The profit which comes out after subtracting the depreciation from total profit is called profit
before interest & tax (PBIT). It shows the real position of a company, because interest & tax is
included in this figure which subtract later on.

43
 Criteria for Analyzing Profitability Ratios

Gross Profit Margin: - The gross profit margin reflects the efficiency with which management
product each unit of product. The gross profit margin relative to the industry average implies that
the company is able to product at relatively lower cost. Dabur India Ltd. have secured 7 th & 6th
ranks in the ending year 2003-2004 and in 2004-2005 so Dabur should reduce the variable costs.

Net Profit Margin: - The net ratio shows the earning left for shareholders (both equity &
preference) as a % of net sales. It measures the overall efficiency of production, administration,
selling, financing, pricing and tax management. It provides a valuable understanding of the cost
and profit structure of the cost and profit structure of the company. In dabur India ltd. has 8.82%
net profit margins in the year 2003-2004 and 11.67 in the year 2004-2005 which is very low in
comparison to the other companies.

Return on Capital Employed: - It indicates the total profitability of the balance sheet from
shareholders point of view. Dabur India Ltd. has secured 6th rank in both the financial years.

Return on Net Worth: - It is calculated by measures the return on the total equity funds of
ordinary shareholders. Dabur India Ltd has again secured 6th rank in both the financial year.

Operating Profit Margin: - It indicates that how much operating cost is involves in business
and how much revenue it is giving in a period. Dabur India Ltd has secured 7th and 6th rank in
this to financial years.

Profit Before Tax & Interest Margin: - Its calculated by subtracting the depreciation from
gross profit margin. Dabur India has secured 7th and 6th rank in these two financial years.

44
Activity Ratios

45
STATEMENT SHOWING INVENTORY TURNOVER RATIO AS ON 31ST MARCH 2004

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Inventory 7.97 7.54 10.88 12.68 9.17 14.40 12.52 11.73
Turnover Ratio

Inventory Turnover Ratio= Cost of Good Sold

Average Stock

INTERPRETATION:

The inventory turnover ratio measures how quickly inventory is sold. It is a test of
efficient inventory management. To judge whether the ratio of a firm is satisfactory or not, it
should be compared over a period of time on the basis of trend analysis. It can also be compared
with the level of the firms in that line of business as well as with industry average.
In general, a high inventory turnover ratio is better than a low ratio. A high ratio implies
good inventory management. Yet, a very high ratio calls for a careful analysis. It may be
indicative of under investment in, or very low level of, inventory. A very low level of inventory
has serious implications. It will adversely affect the ability to meet customer demand as it may
not cope with its requirement.

46
STATEMENT SHOWING INVENTORY TURNOVER RATIO AS ON 31ST MARCH 2005

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Inventory 10.68 8.53 11.26 9.81 10.03 12.60 10.69 11.04
Turnover Ratio

Inventory Turnover Ratio= Cost of Good Sold

Average Stock

INTERPRETATION:

The inventory turnover ratio measures how quickly inventory is sold. It is a test of
efficient inventory management. To judge whether the ratio of a firm is satisfactory or not, it
should be compared over a period of time on the basis of trend analysis. It can also be compared
with the level of the firms in that line of business as well as with industry average.
In general, a high inventory turnover ratio is better than a low ratio. A high ratio implies
good inventory management. Yet, a very high ratio calls for a careful analysis. It may be
indicative of under investment in, or very low level of, inventory. A very low level of inventory
has serious implications. It will adversely affect the ability to meet customer demand as it may
not cope with its requirement.

47
STATEMENT SHOWING DEBTORS TURNOVER RATIO AS ON 31ST MARCH 2004

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Debtors 14.46 22.65 82.01 31.25 36.35 60.93 28.79 47.36
Turnover Ratio

Debtors Turnover Ratio = Total Sales

Debtors + Bill Receivable

INTERPRETATION:

A company can sell its goods on credit also. It is used as a marketing tool by a number of
companies. When the company extends credits to its customers, it will increase more debtors.
Debtors turnover ratio indicates the number of time debtors turnover each year. Generally the
higher the value of debtors turnover, the more efficient is the management of credit.

48
STATEMENT SHOWING DEBTORS TURNOVER RATIO AS ON 31ST MARCH 2005

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Debtors 27.78 23.64 93.28 65.49 57.06 52.20 55.20 53.72
Turnover Ratio

Debtors Turnover Ratio= Total Sales

Debtors + Bill Receivable

INTERPRETATION:

A company can sell its goods on credit also. It is used as a marketing tool by a number
of companies. When the company extends credits to its customers, it will increase more debtors.
Debtors turnover ratio indicates the number of time debtors turnover each year. Generally the
higher the value of debtors turnover, the more efficient is the management of credit.

49
STATEMENT SHOWING FIXED ASSETS TURNOVER RATIO AS ON 31ST MARCH 2004

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Fixed Assets 4.06 4.88 2.92 12.68 2.61 5.34 8.10 7.04
Turnover Ratio

Fixed Assets Turnover Ratio= Sales

Fixed Assets

INTERPRETATION:

The company may wish to know its efficiency of utilizing fixed assets. This ratio
indicates the extent to which the investment in fixed assets contributes towards sales. If
compared with the previous period, it indicates whether the investment in fixed assets has been
judicious or not.

50
STATEMENT SHOWING FIXED ASSETS TURNOVER RATIO AS ON 31ST MARCH 2005

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Fixed Assets 4.33 5.10 2.96 9.81 2.61 6.17 7.84 7.66
Turnover Ratio

Fixed Assets Turnover Ratio= Sales

Fixed Assets

INTERPRETATION:

The company may wish to know its efficiency of utilizing fixed assets. This ratio
indicates the extent to which the investment in fixed assets contributes towards sales. If
compared with the previous period, it indicates whether the investment in fixed assets has been
judicious or not.

51
STATEMENT SHOWING TOTAL ASSETS TURNOVER RATIO AS ON 31ST MARCH 2004

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Fixed Assets 2.80 2.94 7.11 8.44 2.29 3.12 5.34 1.09
Turnover Ratio

Total Assets Turnover Ratio= Sales

Total Assets

INTERPRETATION:

The total assets turnover in addition to or instead of the net assets turnover. This ratio show
the firms ability in generating sales from all financial resources committed to total asset turnover
ratio. The total assets turnover of 2.8 times implies that Dabur generates a sale of Rs. 2.8 for one
rupee investment in fixed and current assets together.

52
STATEMENT SHOWING TOTAL ASSETS TURNOVER RATIO AS ON 31ST MARCH 2005

Companies Dabur HLL Nestle Godrej Cadbury Britannia Colgate P&G

Total Assets 3.72 4.04 7.60 9.85 2.46 3.85 6.08 2.32
Turnover Ratio

Total Assets Turnover Ratio= Sales

Total Assets

INTERPRETATION:

The total assets turnover in addition to or instead of the net assets turnover. This ratio
shows the firms ability in generating sales from all financial resources committed to total assets
turnover ratio. The total assets turnover of 3.72 times implies that Dabur generates a sale of Rs.
3.72 for one rupee investment in fixed and current assets together.

53
 Criteria of Analyzing the Activity Ratios

Inventory Turnover Ratio: - The inventory turnover ratio measure how fast the inventory is
moving through the company and generating sales. It reflects the efficiency of inventory
management. The higher the ratio, the more efficient but this may not always true. The high
inventory turnover may be caused by a low level of inventory which may result in frequent stock
outs. So its ranking is very difficult. Dabur India Ltd has secured 7th and 5th rank in 2003-2004
and in 2004-2005.

Debtors Turnover Ratio: - The debtors turnover ratio shows how quickly receivables or
debtors are converted into cash. It is a test of the liquidity of the debtors of a company. It shows
the relationship between credit sales and debtors of a company. Dabur India Ltd has secured 8 th
and 7th rank in 2003-2004 and in 2004-2005 which is very low in compare to other FMCG
companies.

Fixed Assets Turnover Ratio: - The fixed assets turnover ratio measures the efficiency with
which fixed assets are employed- a high ratio indicates a high degree of efficiency in assets
utilization. For improve the fixed assets turnover Dabur should fully utilize all the assets. It has
secured 6th rank in both the financial year.

Total Assets Turnover Ratio: - The total assets turnover ratio shows the companys ability in
generating sales from all financial resources committed to total assets. Dabur India Ltd has
secured 6th rank in both the financial year.

54
RATIO COMPARISON
OF
DABUR

55
STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3 YEARS

Years 2003-2004 2004-2005 2005-2006

Current Ratio 1.27 0.79 1.47

INTERPRETATION:

Current ratio comes under the liquidity ratios which means the
ability of the company to meet its current obligations. This year(2005-
2006) current ratio has increased in compare to the last two years which
means that company have sufficient money for its current obligation. It is
1.47% this year.

56
 STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3YEARS

Years 2003-2004 2004-2005 2005-2006

Debt Equity Ratio 0.22 0.15 0.45

INTERPRETATION:

Debt equity ratio comes under the leverage ratios and shows the relationship between
creditors and owners of the company. This year (2005-2006) ratio goes very high, which is
0.45% in compare to the last two years. This shows a large share of financing by the creditors of
the firm. This ratio also indicates the margin of safety to the creditors.

57
 STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST
3YEARS

Years 2003-2004 2004-2005 2005-2006

Long Term Debt 0.17 0.11 0.31
Equity Ratio

INTERPRETATION:

Long term debt equity ratio also comes under the leverage ratios and shows the
relationship between creditors and owners of the company. This year (2005-2006) goes very
high, which is 0.31% in compare to the last two years. This shows a large share of financing by
the creditors of the firm. This ratio also indicates the margin of safety to the creditors.

58
STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3YEARS

Years 2003-2004 2004-2005 2005-2006

Gross Profit Ratio 11.25 14.35 15.64

INTERPRETATION:

The gross profit ratio comes under the profitability ratios and this year (2005-2006) it
has increase in compare to last two years. It is 15.64% this year. It represents the limit beyond
which fall in sales prices are outside the tolerance limits.

59
 STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3YEARS

Years 2003-2004 2004-2005 2005-2006

Net Profit Ratio 8.82 11.67 13.80

INTERPRETATION:

The net profit ratio also comes under the profitability ratios and this year (2005-2006) it
has increase in compare to last two years. It is 13.80% this year . This high net profit margin
would ensure adequate return to the owner as well as enable a firm to withstand adverse
economic condition when selling price is declining.

60
 STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3YEARS

Years 2003-2004 2004-2005 2005-2006

Return on Capital 29.50 49.70 49.47
Employed

INTERPRETATION:

The return on capital employed also comes under the profitability ratios and this year
(2005-2006) there is little bit of decrease in compare to last years. It is 49.47% this year . It
refers to the long term funds supplied by the lenders and owner of the firm. It is equal to non-
current liabilities plus owners equity. So it shows that Dabur have sufficient sources of the long
term funds.

61
 STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3YEARS

Years 2003-2004 2004-2005 2005-2006

Return on Net Worth 29.78 48.79 82.47

INTERPRETATION:

The net worth also comes under the profitability ratios and this year (2005-2006) it
has increase in compare to last two years. It is 82.47% this year. This ratio is most important
ratio to judge whether the firm has earning a satisfactory return for its equity holders or not.
Comparing it with the past record of the company, we can interpret that company have a fund for
its equity holders.

62
 STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3YEARS

Years 2003-2004 2004-2005 2005-2006

Debtors Turnover Ratio 14.46 27.78 50.83

INTERPRETATION:

Debtors turnover ratio comes under the activity ratios and this year
(2005-2006) it has increases in compare to last two years. It is 50.83% this year . The debtors
turnover ratio take place when company sell its goods on credit also. It is used as a marketing
tool by a number of companies. This high Debtors turnover ratio indicates the number of time
debtors turnover of last year in Dabur India Ltd. So it shows that Dabur India Ltd is very
efficient in its management of credit.

63
 STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3 YEARS

Years 2003-2004 2004-2005 2005-2006

Average Collection 25.23 13.14 10.16
Period

INTERPRETATION:
The average collection period comes under the activity ratios and this year (2005-2006)
it has decreases in compare to last two years. It is 10.16% this year. This ratio measures the
average number of days customers take to pay their bills, indicating the effectiveness of credit
and collection policies of the business.
The average collection period of Dabur India Ltd. is very low in this year. The company
should try to increase the duration of the average collection period to compete with its
competitors, by offering the customer high cost in credit sales.

64
STATEMENT SHOWING THE RATIO CAMPARISON OF DABUR OF LAST 3YEARS

Years 2003-2004 2004-2005 2005-2006

Fixed Assets Turnover 4.06 4.33 6.88
Ratio

INTERPRETATION:

Fixed assets turnover ratio comes under the activity ratios and this year (2005-2006) it
has increases in compare to last two years. It is 6.88% this year. This ratio shows the efficiency
of utilizing fixed assets of the company. Comparing with the previous period, it indicates that the
investment in fixed assets has been made by the company, Dabur India Limited.

65
 FINDINGS
On the basis of data and available information. Certain findings arrived that relates the
Ratio Analysis of the company.

It is observe that the Dabur India Ltd. has good profit margin and companys
liquidity is also good. It has important from the viewpoint of creditors and
shareholders that company have sufficient fund to pay them.

In the comparison of profitability ratio in Dabur India Ltd. the gross profit ratio
14.35% and net profit ratio 11.67% both are increases in the year 2005-2006 in
compare to last two year.

The current ratio 1.47% is also increase in the year 2005-2006 in compare to last
two year. It shows that current assets increase over current liabilities.

The debt equity ratio 0.45% is also increase in the year 2005-2006 in compare to
last two year. It shows that a large share of financing by creditors in the
company, which is positive sign for the company.

The return on capital employed 49.47% is having little bit of decrease in 2005-
2006 in compare to last year. But then also its better then some other FMCG
companies. It shows that Dabur India Ltd. have sufficient sources of the long
term funds.

The fixed assets turnover ratio 6.88% has increases in 2005-2006 compare to
last two years. It shows the efficiency of Dabur India Ltd. in utilizing the fixed
assets of the company, comparing with the previous period. It also shows that
company has increases its investment in fixed assets.

The debtors turnover ratio 50.83% has increases in 2005-2006 in compare to

last two years, which shows that Dabur India Ltd. is managing its management
of credit very well.

The average collection period is decreases to 10.16% in compare to last two

years. This low average collection period shows a low cost in extending credit to
customers from Dabur India Ltd.

66
 CONCLUSIONS AND
RECOMMENDATIONS

Through the ratio analysis of seven admired companies in the same sector. The various
positive and negative results came out, on the basis of these results I would like to recommend
that-

The company should try to increase the duration of the average collection period
to compete with its competitors, by offering the customer high cost in credit
sales.

The company should try to maintain its net worth for having satisfactory fund for
equity share holders.

The company should give more emphasis to sufficient utilization of the resources
and funds.

The company should improve the return on capital employed, as a source of long
term fund.

The company should reduce its variable cost to increase gross profit margin
which is very low relatively other FMCG companies.

67
 SWOT ANALYSIS
STRENGTHS
A trusted, successful & globally known brand

Maintain its quality (achieved ISO 9000 certificate and other quality related awards)

Old brand recognition

Wide R & D department

WEAKNESSES
Less Economies of scale

Poor Advertising of Dabur Nature Care

OPPORTUNITIES
Increasing health consciousness among people

Increasing Market share

Brand Loyalty among people

Entry in international retail chain through FDI

THREATS
Well-established Competitors

Brands like Colgate, Pepsodent &Close up has

High brand image & Consumer Awareness

To accelerate growth and maintain margins

68
 LIMITATIONS
Although it has been my endeavor to take all necessary precautions to ensure that the
information gathered is authentic and maximum facts are presented but I faced certain
constraints while doing so. The constraints and limitations faced are as mentioned below:

1) Time: The nature of the report required detailed and meticulous information gathering. In
this sense time was a limiting factor and a major constraint to accomplish the given task.
Also sometimes the information was not available on time. This caused a lot of pilferage
of time unnecessary of duplication of effort.

2) Human error: The feedback provided by the company executives, consumers and
others approached has been assumed to be correct. But there might have been wrong and
biased facts given. The opinion of few cannot be generalized in any manner.

3) Non cooperation: While by and large the people approached were helpful some people
were non-cooperative. Also a lot of information was withheld due to its sensitive nature.

4) Calculation error: The report required calculation of figures and at last have to analysis
them also, so mistake can be arises during calculations.

5) Difficulty in comparison: One serious limitation of ratio analysis arises out of the
difficulty associated with their comparability. Such comparisons are vitiated by different
procedures adopted by various companies. The difference may relate to:

Difference in the basis of inventory valuation (eg. Last in first out, first in first
out and average cost)
Different depreciation methods (eg. Straight line v/s written down basis)
Estimated working life of assets, particularly of plant and assets.
Treatment of extraordinary items of income and expenditure, and so on.

6) Conceptual Diversity: The other limitation of ratio analysis is that there is different of
opinion regarding the various concepts used to compute the ratios. There is always room
for diversity of opinion as to what constitutes shareholders equity, debt, assets, profit and
so on. Different companies may be use these terms in different senses or the same
company may use them to mean different things at different times.

69
Appendices

70
71
Balance Sheet As At 31st March 2004

SCHEDULE AS AT 31st MARCH, 2004

(Rs. lac)
SOURCES OF FUNDS:
SHAREHOLDERS FUNDS
A) SHARE CAPITAL 2,862.49
B) RESERVES AND SURPLUS 24,003.32 26,865.81
LOAN FUNDS:
1,909.37
A) SECURED LOANS
2,071.91 3,981.28
B) UNSECURED LOANS

DEFERRED TAX LIABILITY 796.95

TOTAL 31,644.04
APPLICATION OF FUNDS:
FIXED ASSETS
A) GROSS BLOCK 27,450.18
B) LESS: DEPRECIATION -11,955.85
C) NET BLOCK 15,494.33
17,122.67
INVESTMENTS
57.01
DEFERRED TAX ASSETS

CURRENT ASSETS, LOANS AND ADVANCES:

A) INVENTORIES 10,951.93
B) SUNDRY DEBTORS 4,207.22
C) CASH & BANK BALANCES 1,188.72
D) LOANS & ADVANCES
5,584.34

21,932.21

LESS: CURRENT LIABITIES AND PROVISION

A) LIABILITIES 16,452.07
B) PROVISIONS 7,169.81

23,621.88
NET CURRENT ASSETS (1,689.67)
MISCELLANEOUS EXPENDITURE 659.70
(To the extent not written off or adjusted)

TOTAL 31,644.04

72
Balance Sheet As At 31st March 2005

SCHEDULE AS AT 31st MARCH, 2005

(Rs. lac)
SOURCES OF FUNDS:
SHAREHOLDERS FUNDS
C) SHARE CAPITAL 2,864.20
D) RESERVES AND SURPLUS
30,943.15 33,807.35
LOAN FUNDS:
C) SECURED LOANS 1570.38
D) UNSECURED LOANS 3,292.60 4,862.98
DEFERRED TAX LIABILITY
1,277.51

TOTAL 39,947.84
APPLICATION OF FUNDS:
FIXED ASSETS
D) GROSS BLOCK 32,672.44
E) LESS: DEPRECIATION -13,511.83
F) NET BLOCK 19,160.61
INVESTMENTS 27, 094.25
DEFERRED TAX ASSETS 131.75

CURRENT ASSETS, LOANS AND ADVANCES:

E) INVENTORIES 12,802.57
F) SUNDRY DEBTORS 4,928.27
G) CASH & BANK BALANCES 1,065.38
H) LOANS & ADVANCES
6,400.96

25,197.18
LESS: CURRENT LIABITIES AND PROVISION
C) LIABILITIES 23,838.05
D) PROVISIONS 8,384.94

32,222.99
NET CURRENT ASSETS (7,025.81)
MISCELLANEOUS EXPENDITURE 581.04
(To the extent not written off or adjusted)

TOTAL
39,947.84

73
Balance Sheet As At 31st March 2006

74
 SCHEDULE AS AT 31st MARCH, 2006
(Rs. lac)
SOURCES OF FUNDS:
SHAREHOLDERS FUNDS
E) SHARE CAPITAL 5,733.03
F) RESERVES AND SURPLUS
39,053.84 44,786.87
LOAN FUNDS:
E) SECURED LOANS 1,923.23
F) UNSECURED LOANS 134.29 2,057.52
DEFERRED TAX LIABILITY 1,671.50

TOTAL 48515.89
APPLICATION OF FUNDS:
FIXED ASSETS
G) GROSS BLOCK
H) LESS: DEPRECIATION 34,129.37
I) NET BLOCK
-14,245.69 19,883.37
INVESTMENTS

DEFERRED TAX ASSETS

27,
507.77
CURRENT ASSETS, LOANS AND ADVANCES:
I) INVENTORIES
J) SUNDRY DEBTORS
K) CASH & BANK BALANCES
131.74
L) LOANS & ADVANCES
11,560,90

2,694,25
LESS: CURRENT LIABITIES AND PROVISION
E) LIABILITIES
F) PROVISIONS 3,804,41

10,376.66
NET CURRENT ASSETS
MISCELLANEOUS EXPENDITURE
(To the extent not written off or adjusted)
28,436.22
TOTAL

19,342.06

11,388.94

75
 48,515.89
30,731.00

(2,294.78)

3,287.48

BIBLIOGRAPHY

REPORT REFERRED:-

Annual report of Dabur India Limited for the year 2003-2004

Annual report of Dabur India Limited for the year 2004-2005
Annual report of Dabur India Limited for the year 2005-2006
Annual reports of HLL
Balance Sheet of other FMCG companies

WEBSITE SEARCH:-

www.dabur.com
www.indiainfoline.com
www.myiris.com
www.hll.com
www.google.com

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