GODREJ CONSUMER PROUCT LIMITED: TIME

SERIES ANALYSIS
RASHMI SINGH
2016103
SECTION B
GROUP-B1

DAYS SALES OUTSTANDING

Days sales outstanding (DSO) is a measure of the average number of days that a
company takes to collect revenue after a sale has been made. DSO is often
determined on a monthly, quarterly or annual basis and can be calculated by
dividing the amount of accounts receivable during a given period by the total
value of credit sales during the same period, and multiplying the result by the
number of days in the period measured.

Formula: (Accounts Receivable / Sales or Credit Sales) * No. of Days

A low DSO value means that it takes a company fewer days to collect its
accounts receivable. A high DSO number shows that a company is selling its
product to customers on credit and taking longer to collect money.

Mar- Mar- Mar- Mar- Mar-

12 13 14 15 16

Days Sales 45.30 41.66 37.08 42.7 45.87

Outstanding 809 073 142 518 429

Days Sales Outstanding

50
45 45.31 45.87
41.66 42.75
40
37.08
35
30
25
20
15
10
5
0
2012 2013 2014 2015 2016
The high DSO value indicates that Godrej Consumer Product Ltd takes
more no. of days to collect its Accounts Receivables.

DAYS PAYABLE OUTSTANDING

Days payable outstanding (DPO) is a company's average payable period. Days
payable outstanding tells how long it takes a company to pay its invoices from
trade creditors, such as suppliers. DPO is typically looked at either quarterly or
yearly.

Formula: (Accounts Payable / Cost of Sales) * No. of Days

When accounts payable or DPO decrease, this is considered a use of cash, and as
such, it reduces the company's working capital (defined as current
assets minus current liabilities). When accounts payable or DPO go up, this is
considered a source of cash because the company is taking longer to pay its
invoices and thus not using cash as quickly.

Mar-12 Mar-13 Mar-14 Mar-15 Mar-16

Days Payable 132.5 127.5 111.7 94.39 91.58

Outstanding 657 303 175 686 997

Days Payable Outstanding

140
132.57 127.53
120
111.72
100
94.4 91.59
80
60
40
20
0
2012 2013 2014 2015 2016

Decreasing DPO means Godrej Consumer Product Ltd used cash sooner
to pay all the suppliers.

DAYS INVENTORY OUTSTANDING

The days sales of inventory value, or DSI, is a financial measure of a
company's performance that gives investors an idea of how long it takes a
company to turn its inventory (including goods that are a work in progress, if
applicable) into sales. Generally, a lower (shorter) DSI is preferred, but it is
important to note that the average DSI varies from one industry to another.

Formula: (Inventory / Cost of Sales) * No. of Days

A declining ratio over time can indicate that a company is able to sell inventory at a
quicker pace. An increasing ratio, generally a bad sign, can indicate a company held
on to its outstanding inventory for a longer rate than usual.

Mar- Mar- Mar- Mar- Mar-

12 13 14 15 16

Days Inventory 134.4 119.6 103.6 105.6 115.4

Outstanding 752 622 027 518 147

Days Inventory Outstanding

160
140 134.48
120 119.66 115.41
100 103.6 105.65

80
60
40
20
0
2012 2013 2014 2015 2016

The decreasing DIO means that the products were kept in inventory
period for lesser no. of days (i.e till 2014).

OPERATING CYCLE
The operating cycle has been described as the amount of time that it takes for a
manufacturer's cash to be converted into products plus the time it takes for
those products to be sold and turned back into cash. In other words, the
manufacturer's operating cycle involves:
paying for the raw materials needed in its products
paying for the labour and overhead costs needed to convert the raw
materials into products
holding the finished products in inventory until they are sold
 waiting for the customers' cash payments for the products that have been
sold

Formula: DIO + DSO

A short operating cycle is good as it tells that the company's cash is tied up for a
shorter period.

Mar- Mar- Mar- Mar- Mar-

12 13 14 15 16

179.7 161.3 140.6 148.4 161.2

Operating Cycle 833 229 841 036 89

Operating Cycle
200
180 179.78
160 161.32 161.29
148.4
140 140.68
120
100
80
60
40
20
0
2012 2013 2014 2015 2016

The decreasing value for OC means the no time lag in collecting the
cash from its consumers. Hence cash flow is smooth and short term
liabilities are paid out without any problem.

CASH CYCLE
The cash conversion cycle (CCC) is a metric that expresses the length of time, in
days, that it takes for a company to convert resource inputs into cash flows. The
cash conversion cycle attempts to measure the amount of time each net input
dollar is tied up in the production and sales process before it is converted into
cash through sales to customers. This metric looks at the amount of time needed
to sell inventory, the amount of time needed to collect receivables and the
length of time the company is afforded to pay its bills without incurring penalties.

Formula: Cash Cycle= DIO + DSO - DPO

The calculation measures how fast a company can convert cash on hand into
inventory and accounts payable, through sales and accounts receivable, and
then back into cash.

Mar- Mar- Mar- Mar- Mar-

12 13 14 15 16

47.21 33.79 28.96 54.00 69.69

Cash Cycle 763 266 656 676 899

Cash Cycle
80
70 69.7
60
54.01
50 47.22
40
33.79
30 28.97
20
10
0
2012 2013 2014 2015 2016

The decreasing cash cycle means company can buy inventory, sell it,
and receive cash from customers in less time (i.e till 2014). The
increasing cash cycle is not good as the inventory is not converted to
cash sooner due to which the short term liabilities may not be paid on
time, debt repayment will be delayed and additional purchases will also
suffer.

CURRENT RATIO
The current ratio is a liquidity ratio that measures a company's ability to
pay short-term and long-term obligations. To gauge this ability, the current ratio
considers the current total assets of a company (both liquid and illiquid) relative
to that companys current total liabilities.

Formula: Current Ratio = Current Asset / Current Liabilities

A current ratio below 1 is usually not a good sign.

Mar- Mar- Mar- Mar- Mar-

12 13 14 15 16

0.812 0.877 0.742 0.751 0.858

Current Ratio 508 159 831 929 131
 Current Ratio
0.9
0.88
0.85 0.86

0.81
0.8

0.75 0.75
0.74

0.7

0.65
2012 2013 2014 2015 2016

The increase in the CR is due to ease of selling inventory and operating

cycle being short as well. The decrease or lowering in CR is due to pays
not being made by customers and hence liabilities increasing leading to
pulling down CR.

QUICK RATIO
The quick ratio is an indicator of a companys short-term liquidity. The quick
ratio measures a companys ability to meet its short-term obligations with its
most liquid assets.

Formula: Quick Ratio = (Current asset Inventories) / Current Liabilities

The higher the quick ratio, the better the company's liquidity position. A quick
ratio of 0.5 would suggest that a company is able to settle half of its current
liabilities instaneously.

Mar- Mar- Mar- Mar- Mar-

12 13 14 15 16

0.797 0.790 0.643 0.77 0.901

Quick Ratio 662 356 061 528 263
 Quick Ratio
1
0.9 0.9
0.8 0.8 0.79 0.78
0.7
0.64
0.6
0.5
0.4
0.3
0.2
0.1
0
2012 2013 2014 2015 2016

As the cash collection in 2014 was less hence the quick ratio dipped as
there were much inventories left in warehouses and hence liabilities
increased and QR decreased.

RATIO OF CURRENT ASSETS TO TOTAL ASSETS

It indicates the extent of total funds invested for the purpose of working capital
and throws light on the importance of current assets of a firm. It should be
worthwhile to observe that how much of that portion of total assets is occupied
by the current assets, as current assets are essentially involved in forming
working capital and also take an active part in increasing liquidity

Formula: Current Assets / Total Assets

Mar- Mar- Mar- Mar- Mar-

12 13 14 15 16

Current
Assets/Total 0.335 0.369 0.338 0.338 0.349
Assets 985 874 547 468 338
Ratio of Current Assets to Total Assets
0.38

0.37 0.37
0.36

0.35 0.35
0.34 0.34 0.34
0.34
0.33

0.32

0.31
2012 2013 2014 2015 2016

The decrease in the cash due to inventory holding and lesser consumer
paying to us seen in the DIO, DSO, and OC gave us a lead to know these
dipping in current assets compared to other total fixed assets.

WORKING CAPITAL TO SALES RATIO

Working capital turnover is a measurement comparing the depletion of working
capital used to fund operations and purchase inventory, which is then converted
into sales revenue for the company. The working capital turnover ratio is used to
analyse the relationship between the money that funds operations and the sales
generated from these operations.

Formula: (Current Asset Current Liabilities)/ Sales

Mar- Mar- Mar- Mar- Mar-

12 13 14 15 16

Working
Capital/Sales 0.096 0.088 0.015 0.058 0.118
Ratio 708 727 574 818 379
 Working Capital To Sales Ratio
0.14

0.12 0.12
0.1 0.1
0.09
0.08

0.06 0.06
0.04

0.02 0.02
0
2012 2013 2014 2015 2016

When the current assets were more than current liabilities, the
liabilities were paid out of those cash arriving from the consumers
which didnt happen in 2014 due to which we see a dip in working
capital to sales ratio.