Project Report (Submitted for the Degree of B.Com.

Honours in 
Accounting & Finance under the University of Calcutta) 

FINANCIAL STATEMENT ANALYSIS OF 

DABUR INDIA LTD. & ITC LTD. 
Submitted by 
Name of the Candidate : Kankana Nag 
Registration Number : 034-1221-0526-13 
Name of the College : Shri Shikshayatan College 
College Roll Number : 155 
Supervised by 
Name of the Supervisor: Smt. Papiya Chaudhury 
Name of the College: Shri Shikshayatan College 
Month and Year of Submission 
FEBRUARY 2016 
~ I ~ 
 
Annexure I-A 
Supervisor's Certificate 
This is to certify that Miss Kankana Nag a student of B.Com Honours in 
Accounting & Finance of Shri Shikshayatan College under the University of 
Calcutta has worked under my supervision and guidance for her Project Work and 
prepared a Project Report with the title FINANCIAL STATEMENT ANALYSIS 
OF DABUR AND ITC which she is submitting, is her genuine and original work 
to the best of my knowledge. 
Place: Kolkata Signature: 
Date: Name: Smt. Papiya Chaudhury 
Designation: Associate Professor 
Shri Shikshayatan College 
~ II ~ 
 
Annexure I-B 
Student's Declaration 
I hereby declare that the Project Work with the title FINANCIAL 
STATEMENT ANALYSIS OF DABUR & ITC submitted by me for the 
partial fulfillment of the degree of B.Com. Honours in Accounting & Finance 
under the University of Calcutta is my original work and has not been 
submitted 
earlier to any other University /Institution for the fulfillment of the 
requirement 
for any course of study. I also declare that no chapter of this manuscript in 
whole or in part has been incorporated in this report from any earlier work 
done 
by others or by me. However, extracts of any literature which has been used 
for 
this report has been duly acknowledged providing details of such literature in 
the references. 
Signature: 
Name: Kankana Nag 
Address: AA-151, Sector 1, Salt Lake City, Kolkata-7000064 
Registration Number: 034-1221-0526-13 
Place: Kolkata 
Date: 
~ III ~ 
 
ACKNOWLEDGEMENT 
The  success  and  final  outcome  of  this  project  required  a  lot  of  guidance  and 
assistance  from  many  individuals  and  I  am  extremely  fortunate  to  have  got this all 
along the completion of my project work. Whatever I have done is only due to such 
guidance and assistance. 
Firstly  I  would  like  to  thank  my  supervisor  Smt.  Papiya  Chaudhury  for  her 
continuous  support  in  this  project,  for  pin  pointing  the  errors  and  suggesting 
necessary  measures  to  debug  them.  I  would  also  use  this  platform  to  express  my 
deep  regards  for  our  Head  of  the  Department,  Dr.  Kajal  Gandhi  and  Principal  Dr. 
Aditi  Dey for being so helpful and considerate. Infact I was fortunate enough to get 
constant  encouragement,  support  and  guidance  from  all  the  teaching  staff  of  the 
Commerce Department. 
Apart  from  this  I  would  also  like  to  thank  my  friends,  who  gave  me  suggestions 
and  advices  to  do  this  project.  Last  but  not  the  least  I  would  like  to  thank  my 
family,  my  parents  for  educating  me  with  the  aspects  of  commerce,  for  their 
unconditional  support  and  encouragement  to  pursue  my  interest;  my  sister  for 
sharing  her  knowledge  relating  to  this  particular  topic.  I  like  to  thank  God  for 
giving  me  strength  and  capability,  and  also  for  helping  me  complete  my project in 
high perfection. 
~ IV ~ 
 
SYNOPSIS 
Financial  statements  are  formal  records  of  the  financial  activities  of  a  business, 
person,  or  other  entity  and  provide  an  overview  of  a  business  or  person's  financial 
condition  in  both  short  and  long  term.  They  give  an  accurate  picture  of  a 
company’s  condition  and  operating  results  in  a  condensed  form.  Analysis  and 
interpretation  of  financial  statements  help  in  determining  the  liquidity  position, 
long  term  solvency,  financial  viability  and  profitability  of  a  firm.  It  helps  the 
clients  to  decide  in which firm the risk is less or in which one they should invest so 
that maximum benefit can be earned. 
The report at hand manifests an in-depth analysis of the financial statements of ITC 
Ltd.  and  Dabur  India  Ltd.  that  caters  to  the  fast  moving  consumer  goods  (FMCG) 
segment  of  the  national  market.  An  attempt  has  been  carried  out  in  this  study  to 
scrutinize  the  financial  statements  of  the  companies  and  justify  whether 
profitability  is  sufficient  enough  to  determine  the  performance  of  a company. This 
report  comprises  of  a  literature  review  which  projects  the  perceptions  of  different 
authors  about  the  different  ratios  used  to  analyse  the  financial  statements followed 
by  the  analysis  of  the  financial  statements  using  financial  ratios  and  ends  with  a 
brief conclusion and recommendation. 
The  objective  of  this  paper  is:  To  understand,  analyze  and  interpret  the  basic 
concepts  of  financial  statements  of  different  FMCG  companies,  to  interpret  the 
financial  ratios  and  their  significance,  to  study  the  solvency  liquidity  and 
profitability position of these companies during the time span of 2011-2015. 
The data used for the study is secondary data obtained from the web pages, as 
disclosed by the 2 companies. 
~ V ~ 
 
TABLE OF CONTENTS 
Sl. No. Chapter Name Page 
No. 
Chapter 1 Introduction 
➢ 1.1 Background of the study 1 
➢ 1.2 Literature review 2 
➢ 1.3 Research design 4 
Chapter 2 Conceptual Framework 
➢ 2.1 Concept 5 
▪ 2.1.1 Steps in ratio analysis 5 
▪ 2.1.2 Classification of Ratio 6 
➢ 2.2 Benefits and Challenges 7 
▪ 2.2.1 Importance of financial ratios 7 
▪ 2.2.2 Limitations of financial ratios 9 
Chapter 3 Analysis and Findings 
➢ 3.1 Objectives of the study 10 
➢ 3.2Methodology 10 
▪ 3.2.1 Sample 10 
▪ 3.2.2 Data Type 11 
~ VI ~ 
 
Sl. No. Chapter Name Page 
No. 
▪ 3.2.3 Data Source 12 
▪ 3.2.4 Period of study 12 
▪ 3.2.5 Tools used 12 
➢ 3.3 Analysis and Findings 13 
▪ 3.3.1 Current Ratio 13 
▪ 3.3.2 Liquid Ratio 16 
▪ 3.3.3 Absolute liquidity Ratio 19 
▪ 3.3.4 Proprietary Ratio 22 
▪ 3.3.5 Fixed Assets to Equity Ratio 25 
▪ 3.3.6 Debt-Equity Ratio 28 
▪ 3.3.7 Net Profit Ratio 31 
▪ 3.3.8 Operating Profit Ratio 34 
▪ 3.3.9 Return on Equity Ratio 37 
▪ 3.3.10 Earnings per Share Ratio 40 
Chapter 4 Conclusions and recommendations 
➢ 4.1 Summary Observations 43 
➢ 4.2 Recommendations for Improvement 44 
➢ 4.3 Limitations of the Study 45 
➢ 4.4 Scope for further Research 46 
~ VII ~ 
 
1. INTRODUCTION 
1.1 BACKGROUND OF THE STUDY 
Financial  statements  are  the  mirror  which  reflects  the  financial  position, 
strength  and  weakness  of  the  company.  Financial  statements  of the company helps 
to  know  how  a  business  is  doing  and  how  it’s  useful  internally  for  a  company- 
stock  holders  and  to  its  board  of  directors,  its  managers  and  some  employees 
including  labor  unions,  externally  they  are  important  to  perspective  investors,  to 
government  agencies  responsible  for  taxing  and  regulating,  to  lenders  such  as 
banks  and  credit  rating  agencies  &  investment  analysts  &  stock  brokers.  Financial 
statement  analysis  involves  careful  selection  of  data  from  financial  statements  for 
the  primary  purpose  of  forecasting  the  financial  health  of  the  company.  This  is 
accomplished  by  examining  trends  in  key  financial  data,  comparing  financial  data 
across  companies,  and  analyzing  key  financial  ratios.  John  N.  Myres  defines  that 
“Financial  statement  analysis  is  largely  a  study  of  relationships  among  the various 
financial factors in a business, as disclosed by a single set of statements and a study 
of the trends of these factors as shown in a series of statements.” 
Fast  Moving  Consumer  Goods  (FMCG),  are  the  products  that  are  sold  quickly  at 
relatively  low  cost.  Though  the  absolute  profits  made  by  FMCG  companies  are 
relatively  small,  the  goods  generally  sell  in  large  quantities,  so  the  cumulative 
profits  on such products can be large. Examples of FMCG generally include a wide 
range  consumer  products  such  as  toiletries,  soap,  cosmetics,  teeth  cleaning 
products,  detergents  etc.  India  having  a  population  of  1.252  billion  as  of  2013  is  a 
vital  target  market  for  Consumer  Goods  produced  globally.  Two  of  the  most 
significant  Indian  companies  dealing  in  FMCG  is  inarguably  ITC  Ltd  and  Dabur 
India  Ltd.  They  cater  to  and  touch  the  lives  of  1  out  of  every  3  India  through  the 
sale  of  their  chain  of  consumer  goods.  Their  equity  shares  are  listed  on  Bombay 
Stock  Exchange,  National  Stock  Exchange  of  India  and  Calcutta  Stock  Exchange. 
Analysis  and  interpretation  of  the  solvency,  liquidity  and  profitability  positions  of 
these  companies  in  a  comparative  approach  would  aid  the  investors  in  taking 
rational decisions 
~ - 1 - ~ 
 
1.2 LITERATURE REVIEW 
A brief discussion of the reviews of the previous researches related with study of 
ratio analysis is being presented below: 
Chen  and  Shimerda  (1981)  examined  the  financial ratios used in a number of early 
studies  for  analysis  and  prediction  of  the  financial  soundness  of  the  entities.  They 
noted  that  there  was  an  abundant  41  different  financial  ratios  which  were  found 
useful  in  the  earlier  studies. They reconciled by judgement the factors in the earlier 
studies  into  financial  leverage,  capital  turnover,  return  on  investment,  inventory 
turnover, receivables turnover, short-term liquidity, and cash position. 
Martikainen  (1993)  classified  financial  ratios  and  tested  their  stability  with 
transformation  analysis  in  a  study  identifying  the  key  factors  that  determine  stock 
returns. 
Elizabeth  Duncan  and  Elliott  (2004)  he  had  pointed  out  that  he  had  stated  that  the 
paper  in  the title of efficiency, Customer service and financing performance among 
Australian  financial  institutions  showed  that  all  financial  performance measures as 
interest  margin,  return  on  assets,  and  capital  adequacy  are  Positively  correlated 
with customer service quality scores. 
Jonas  Elmerraji  (2005)  in  his research article on financial performance had pointed 
out  that  ratios  can  be  an  invaluable  tool  for  making  an  Investment  decision.  Even 
so,  many  new  investors  would  rather  leave  their  decisions  to  fate  than  try  to  deal 
with  the  intimidation  of  financial  ratios.  The  truth  is  that  ratios  aren't  that 
intimidating,  Even  if  one doesn’t have a degree in business or finance. Using ratios 
to  make  informed  decisions  about  an  investment  makes  a  lot  of  sense,  once  one 
knows how to use them. 
Bull  (2007) stated that financial ratio analysis help managers to analyse control and 
improve  an  organisations  operations.  Credit  analysts  can  use  it  to  determine  the 
ability  of  an  organisation  to pay its debts and security analysts can use it to analyse 
an organisations ability to pay interests on its bonds. 
~ - 2 - ~ 
 
Besley  and  Brigham  (2008)  suggested  that  financial  statement  analysis  may  be 
used  to  help  predict  the  firm’s  financial  position  in  the  future  and  to  determine 
expected earnings and dividends. 
Frederic  M.  Scherer,  (2008)  examined  how  product  innovation  contributes  to  the 
renewal  of  the  firm  through  its  dynamic  and  reciprocal  relation  with  the  firm’s 
competences.  Based  on  the  notion  that  new  products  are  created  by  linking 
competences  relating  to  technologies  and  customers,  a  typology  is  derived  that 
classifies  new  product  projects  based  on  weather  a  new  product  can  draw  on 
existing  competences.  Following  organizational  learning  these  options  are 
conceptualized  as  exploitation  and  exploration.  These  organizational  concepts  are 
used  to  gain  a  dynamic  and  path-dependent  view  of  product  innovation  and 
development,  and  to  reveal  the  unique  nature  and  challenges  of  different  types  of 
product innovation. 
Gibson  (2010)  said  that  investors  and  other  external  users  of  financial  information 
will  often  need to measure the performance and financial health of an organization. 
This  is  done  in  order  to  evaluate  the  success  of  the  business,  determine  any 
weaknesses  of  the  business,  compare  current  and  past  performance,  and  compare 
current  performance  with  industry  standards.  Financially  stable  organizations  are 
desirable,  because  a  financially  stable  business  is  one  that  successfully  ensures  its 
ability to generate income for investors and retain or increase value 
Rachchh  Minaxi  A  (2011),  in  his  research  article  on  financial  performance  had 
pointed  &  suggested  that  the  financial  statement  analysis  involves  analyzing  the 
financial  statements  to  extract  information  that  can  facilitate  decision  making. It is 
the  process  of  evaluating  the relationship between component parts of the financial 
statements to obtain a better understanding of an entity’s position and performance. 
Priyaaks  (Mar  2012),  had  stated  that  Financial  statement  analysis  is  the  process  of 
examining  relationships  among  financial  statement  elements  and  making 
comparisons  with  relevant  information.  It  is  a  tool  in  decision-making  processes 
related to stocks, bonds, and other financial instruments 
~ - 3 - ~ 
 
From  the  above  literature  review,  it  is  evident  that,  the  financial  performance 
depicts  the efficiency of organization. Along with that financial statements are very 
useful for decision making in the company by Board of Directors and management. 
It also helps to know the prosperity of the company with the profitability. 

1.3 RESEARCH DESIGN 

Chapter 2 : Conceptual Framework 
Chapter 3 : Analysis and Findings 
Chapter 4 : Conclusion and Recommendations 
~ - 4 - ~ 
 
2. CONCEPTUAL FRAMEWORK 
2.1 CONCEPT 
The  major  tool  of  analysis  of  financial  statements  of  companies  is  RATIO 
ANALYSIS.  Financial  ratios  are  mathematical  comparisons  of  financial  statement 
accounts  or  categories.  These  relationships  between  the  financial  statement 
accounts  help  investors,  creditors,  and  internal  company  management  understand 
how  well  a  business  is  performing  and  areas  of  needing  improvement.  Ratios  are 
easy  to  understand  and  simple  to  compute.  They  can  also  be  used  to  compare 
different  companies  in different industries. Since a ratio is simply a mathematically 
comparison  based  on  proportions,  big  and  small  companies  can  be  use  ratios  to 
compare  their  financial  information.  In  a  sense,  financial  ratios  don't  take  into 
consideration  the  size  of  a  company  or  the  industry.  Ratios  are  just  a  raw 
computation of financial position and performance. 
Ratios  allow  us  to  compare  companies  across  industries,  big  and  small,  to identify 
their  strengths  and  weaknesses.  Financial  ratios  are  often  divided  up  into  seven 
main  categories:  liquidity,  solvency,  efficiency,  profitability,  market  prospect, 
investment leverage, and coverage. 
2.1.1 STEPS IN RATIO ANALYSIS:- 
The ratio analysis requires two steps: 
• Calculation of ratio 
• Comparing the ratio with some predetermined standards. The standard ratio 
may be the past ratio of the same firm or industry’s average ratio or the ratio 
of the most successful firm in the industry. In interpreting the ratio of a 
particular firm, the analyst cannot reach any fruitful conclusion unless the 
~ - 5 - ~ 
 
calculated ratio is compared with some predetermined standard. The 
importance of a correct standard is oblivious as the conclusion is going to be 
based on standard itself. 
2.1.2 CLASSIFICATION OF RATIO 
BASED ON FINANCIAL STATEMENT 
Accounting  ratios  express  the  relationship  between  figures  taken  from  financial 
statements.  Figures  may be taken from Balance Sheet, P&L A/C, or both. One-way 
of classification of ratio is based upon the sources from which are taken. 
BALANCE  SHEET  RATIO:  Balance  sheet  is  the financial statement that provides 
a  picture  of  a company’s financial position by listing a company’s assets, liabilities 
and  shareholder’s  equity.  Income  statement  and  cash  flows  statement  provides 
information about profitability and cash flows. 
A financial ratio determines relationship between two components. These may 
include: 
Balance Sheet Ratio 
Based on Financial Statement 
Financial Ratios 
Liquidity Ratios 
~ - 6 - ~ 
Solvency Ratios 
Based on functions 
Profitability Ratios 
 
Two ▪ 
balance sheet components, i.e. assets, liabilities and shareholders’ equity 
▪ 

Two income statement components, i.e. sales, gross profit, net income, etc. 
▪ 

A balance sheet component and an income statement component 

▪ 

An income statement component and a cash flows statement component 

▪ 

A balance sheet component and a cash flows statement component 

A  balance  sheet  ratio belongs to the first category, i.e. it includes either two classes 
of  assets,  assets  and  liabilities,  assets  and  shareholders  equity,  liabilities  and  share 
holders equity. 
BASED ON FUNCTIONS 
LIQUIDITY RATIOS: It shows the relationship between the current assets and 
current liabilities of the concern. E.g. liquid ratios and current ratios. 
SOLVENCY  RATIOS:  It  shows  the  relationship  between  proprietor’s  funds  and 
debts  used  in  financing  the  assets  of  the  concern.  E.g.  Capital  Gearing  ratio,  debt 
equity ratio & proprietary ratio. 
PROFITABILITY RATIOS: Shows the relationship between profit & sales. E.g. 
Operating ratios, gross profit ratio, operating net profit ratio, etc. 

2.2 BENEFITS AND CHALLENGES 

2.2.1 IMPORTANCE: 
As  a  tool  of  financial  management,  ratios  are  of  crucial  significance.  The 
importance  of  ratio  analysis  lies  in  the  fact  that  it  presents  facts  on  a  comparative 
basis  &  enables  the  drawing  of  interference  regarding  the  performance  of  a  firm. 
Ratio  analysis  is  relevant  in  assessing  the  performance  of  a  firm  in  respect  of  the 
following aspects: 
~ - 7 - ~ 
 
1.  Liquidity  position:  Ratio  analysis  helps  in  determining  the  liquidity  position  of 
the  firm.  A  firm  can  be said to have the ability to meet its current obligations when 
they become due. It is measured with the help of liquidity ratios. 
2.  Long  term  solvency:  Ratio  analysis  is  equally  useful  for assessing the long term 
financial  viability  of  a  firm.  This  respect  of  the  financial  position  of  a  borrower  is 
of  concern  to  the  long  term  creditors,  security  analyst  &  the  present  &  potential 
owners  of  a  business.  The  long  term  solvency  is  measured  by  the  leverage/capital 
structure & profitability ratio. 
3.  Operating efficiency: The various activity ratios measure this kind of operational 
efficiency.  In fact, the solvency of a firm is in the ultimate analysis dependent upon 
the  sales  revenues  generated  by  the  use  of  its  assets-  total  as  well  as  its 
components. 
4.  Overall  profitability:  The  management  is  constantly  concerned  about  overall 
profitability  of  the  enterprise.  That  is,  they  are  concerned  about  the  ability  of  the 
firm  to  meets  its short term as well as obligations to its creditors. This is possible if 
an integrated view is taken & all the ratios are considered together. 
5.  Inter  firm  comparison:  An  inter  firm  comparison  would  demonstrate  a  firms 
position  vice-versa  its  competitors.  If  the  results  are  at  variance  either  with  the 
industry  average or with those of the competitors, the firm can seek to indentify the 
probable & in light. Take remedial measure. 
~ - 8 - ~ 
 
6.  Trend  analysis:  Finally,  ratio  analysis  enables  a  firm  to  take  the  time dimension 
into  account.  In  other  words,  whether  the  financial  position  of  a  firm  is  improving 
or deteriorating over the years. This is made possible by the use of trend analysis. 
2.2.2 LIMITATIONS: 
1.  Historical  Results:  All  of  the  information  used  in  ratio  analysis  is  derived  from 
actual historical results. This does not mean that the same results will carry forward 
into the future. 
2. Inflation: If the rate of inflation has changed in any of the periods under review, 
this can mean that the numbers are not comparable across periods. 
3.  Operational  changes:  A  company  may  change  its  underlying  operational 
structure  to such an extent that a ratio calculated several years ago and compared to 
the same ratio today would yield a misleading conclusion. 
4.  Accounting  policies:  Different  companies  may  have  different  policies  for 
recording  the  same  accounting  transaction.  This  means  that  comparing  the  ratio 
results of different companies may be like comparing apples and oranges. 
5. Company strategy: It can be dangerous to conduct a ratio analysis 
comparison between two firms that are pursuing different strategies. 
In short, ratio analysis has a variety of limitations that can limit its usefulness. But 
as long as one is aware of these problems it’s an useful tool. 
~ - 9 - ~ 
 
3. ANALYSIS AND FINDINGS 
3.1 OBJECTIVES OF STUDY 
▪ To analyse the financial performances of the companies through relevant 
financial analysis. 
▪ To study the growth profile of the companies during the study period. 
▪ To appraise the financial soundness of the companies - Dabur India Ltd. and ITC 
Ltd. 
▪ To provide valuable suggestions and recommendations to the companies. 

3.2 METHODOLOGY 
3.2.1 Sample (Company Profiles) 
ITC  Limited  or  ITC  is  an  Indian  conglomerate  headquartered  in  Kolkata,  West 
Bengal.  Its  diversified  business  includes  five  segments:  Fast  Moving  Consumer 
Goods  (FMCG),  Hotels,  Paperboards  &  Packaging,  Agricultural  Business  & 
Information  Technology.  Established in 1910 as the Imperial Tobacco Company of 
India  Limited,  the  company  was renamed as the Indian Tobacco Company Limited 
in 1970 and further to I.T.C. Limited in 1974. The periods in the name were 
~ - 10 - ~ 
 
removed  in  September  2001  for  the  company  to  be  renamed  as  ITC  Ltd.  The 
company  completed  100  years  in  2010  and  as  of  2012-13,  had  an  annual  turnover 
of  US$8.31  billion  and  a  market  capitalization  of  US$45  billion.  It  employs  over 
25,000  people  at  more  than  60  locations  across  India  and  is  part  of  Forbes  2000 
list. 
Dabur  (Dabur  India  Ltd.)  (Devanagari:  derived  from  Daktar  Burman)  is  the fourth 
largest  Fast  Moving  Consumer  Goods  (FMCG)  company  in  India  with 
consolidated Revenues of over INR 7,800 Crores and Market Capitalisation of over 
INR  46,600  Crore  (at  the  end  of  2014-15).  Building on a legacy of over 130 years, 
Dabur  is  today  India’s  most  trusted  name  and  the  world’s  largest  Ayurvedic 
medicine  &  related  products  manufacturer  and  Natural  Health  Care  Company. 
Today,  Dabur  has  a  portfolio  of  over  381  trusted  products  spread  across  21 
categories  and  over 1,000 SKUs. Dabur was founded in 1884 by Dr. S. K. Burman, 
a physician in West Bengal, to produce and dispense Ayurvedic medicines. 
3.2.2 Data Type 
The data used in this study is secondary. Due to the busy schedule of the high 
officials of the companies the collection of primary data was not possible. 
~ - 11 - ~ 
 
3.2.3 Data Source 
Data have been collected from the websites of both the companies and their 
annual reports 
3.2.4 Period of Study 
Financial year 2011-12 to 2014-15 
3.2.5 Tools Used 
The tools used for analysis and graphical representation are Bar Graphs, Linear 
graphs, pie charts created with the help of MS Word. 
~ - 12 - ~ 
 
3.3 Analysis and Findings 
3.3.1 CURRENT RATIO 
The ratio compares the current assets to current liabilities. It is also known as working capital 
ratio or ‘solvency ratio’. The ideal current ratio for a company is 2:1. 
CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES 

ITC 
TABLE 1 CURRENT RATIO OF ITC 

YEAR CURRENT 
ASSETS 
CURRENT LIABILITIES 
CURRENT RATIO 
2011- 2012 15801.45 9304.00 1.69 
2012-2013 17591.47 10330.73 1.70 
2013-2014 22581.06 11886.06 1.89 
2014-2015 23955.03 11681.91 2.05 
SOURCE : BALANCE SHEETS OF ITC LTD. 
2.5 
2.05 2 
1.69 1.7 
1.89 
1.5 
0 
2011- 2012 2012-2013 2013-2014 2014-2015 
GRAPH 2 CURRENT RATIO OF ITC 
2011- 2012 
2012-2013 1 
2013-2014 
0.5 
2014-2015 

~ - 13 - ~ 
 
DABUR 
TABLE 3 CURRENT RATIO OF DABUR 

YEAR 
CURRENT ASSETS 
CURRENT LIABILITIES 
CURRENT RATIO 
2011- 2012 1630.62 1077.42 1.51 
2012-2013 1737.39 1158.44 1.49 
2013-2014 1969.85 1136.68 1.73 
2014-2015 1572.32 1259.03 1.25 
SOURCE: BALANCE SHEETS OF DABUR INDIA LTD. 

CURRENT RATIO DABUR 

1.73 1.8 
1.6 
1.51 1.49 
1.4 
1.25 
1.2 
1 
0.8 
0.6 
0.4 
0.2 
0 
2011- 2012 2012-2013 2013-2014 2014-2015 
GRAPH 2 CURRENT RATIO OF DABUR 

~ - 14 - ~ 
 
INTERPRETATION OF CURRENT RATIO 
In  Graph  1  (ITC)  the  current  ratio  is  increasing  from  1.69  in  year  2011-12  to  2.05  in  year 
2014-15.  So  it  can  be  said  that  the  company  has  reached  ideal  current  ratio  in  2014-15.  .  It 
indicates  that  company  current  ratio is in a stronger position and the company has sufficient cash 
liquidity  to  meet  its  short-term  liquidity.  Whereas  in  Graph  2  (Dabur)  the  current  ratio  is 
decreasing  from  1.51  in  year  2011-12  to  1.25  in  the  year  2014-15  which  is 1.5 times lower than 
that of ITC Ltd. on an average. Thus a higher current ratio is preferable. 
2.5 
2.05 2 
1.73 
1.5 
1.51 
1.49 
1.25 
1 
0.5 
0 
2011- 2012 2012-2013 2013-2014 2014-2015 
GRAPH 3: COMPARING THE CURRENT RATIOS OF THE TWO COMPANIES ITC & DABUR 
1.69 1.7 
CURRENT RATIO ITC 

~ - 15 - ~ 
1.89 
CURRENT RATIO Dabur 
 
3.3.2 LIQUID RATIO 
Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compares quick assets 
with quick liabilities. The ideal liquid ratio is 1:1. 
LIQUID RATIO= QUICK ASSETS / QUICK LIABILITIES 

ITC 
TABLE 3 LIQUID RATIO OF ITC 

YEAR CASH AND 

CASH EQUIVALENT 
SHORTTERM INVESTMENT 
ACCOUNTS RECEIVABLE 
CURRENT LIABILITIES 
QUICK RATIO 
2011-12 3130.12 465.98 1203.84 9304.00 0.51 
2012-13 3615.00 512.12 1163.34 10330.73 0.51 
2013-14 3490.19 816.12 2439.21 11886.06 0.56 
2014-15 7588.61 549.89 1722.40 11681.91 0.84 
SOURCE: BALANCE SHEETS OF ITC LTD. 
0.9 0.8 

LIQUID RATIO 
0.7 0.6 0.5 
2011-12 2012-13 2013-14 2014-15 
GRAPH 4 LIQUID RATIO OF ITC 0.4 
0.84 
0.3 0.2 0.1 0 
0.51 0.51 

~ - 16 - ~ 
0.56 
 
DABUR 
TABLE 4 LIQUID RATIO OF DABUR 

YEAR CASH AND 

CASH EQUIVALENT 
SHORTTERM 
ACCOUNTS INVESTMENT 
RECEIVABLE 
QUICK RATIO 
2011-12 291.29 141.33 224.17 1077.42 0.60 
2012-13 319.40 116.53 255.32 1158.44 0.59 
2013-14 297.47 84.62 323.12 1136.68 0.62 
2014-15 123.94 114.08 338.79 1259.03 0.46 
SOURCE: BALANCE SHEETS OF DABUR LTD. 
GRAPH 5 LIQUID RATIO OF DABUR 

~ - 17 - ~ 
LIQUID RATIO 
0.7 
0.6 
0.5 
0.4 
0.3 
0.62 
0.2 
0.46 
0.1 
0 
2011-12 2012-13 2013-14 2014-15 
0.6 0.59 
CURRENT LIABILITIES 
 
INTERPRETATION OF LIQUID RATIO 
In general, higher quick ratio is preferable than lower ratio. From the data above, in Graph 4 
(ITC) the liquid ratio is increasing from 0.51 in year 2011-12 to 0.84 in year 2014-15. Whereas 
in Graph 4 (Dabur) the liquid ratio is decreasing from 0.6 in year 2011-12 to 0.46 in the year 
2014-15. The comparison between the years 2013-14 and 2014-15 reveals that their (Dabur’s) 
quick ratio has substantially decreased during the particular year. So it indicates that the 
industry’s profit margin was not so high that they could make some investments paying off the 
liabilities that could result in an increase in assets and decrease in liabilities to make the liquidity 
position far better. 
QUICK RATIO ITC 
QUICK RATIO DABUR 0.9 
0.8 
0.6 
0.84 
0.7 
0.59 0.62 
0.6 
0.51 
0.5 
0.51 
0.56 
0.46 
0.4 
0.3 
0.2 
0.1 
0 
2011-12 
2012-13 
2013-14 
2014-15 
GRAPH 4 COMPARING THE QUICK RATIOS OF TWO COMPANIES ITC & DABUR 
~ - 18 - ~ 
 
3.3.3 ABSOLUTE LIQUIDITY RATIO 
It  is  a  variation  of  quick  ratio.  Absolute  liquidity  ratio  measures  relationship  between  cash  and 
near  cash  items  on  one  hand  immediately  maturing  obligation  on  the  other.  The  ideal  Absolute 
quick ratio is 0.75:1. 
ABSOLUTE LIQUIDITY RATIO= (CASH + MARKETABLE SECURITIES) / 
CURRENT LIABILITIES ITC 
TABLE 5 ABSOLUTE LIQUIDITY RATIO OF ITC YEAR CASH & CASH EQUIVALENTS 

CURRENT LIABILITIES 
ABSOLUTE LIQUIDITY RATIO 2011-12 3130.12 
9304.00 
0.37 
2012-13 3615.00 
10330.73 
0.35 
2013-14 3490.19 
11886.06 
0.29 
2014-15 7588.61 
11681.91 
0.65 
SOURCE: BALANCE SHEETS OF ITC LTD. 
ABSOLUTE LIQUIDITY RATIO ITC 
GRAPH 7 ABSOLUTE LIQUIDITY RATIO OF ITC 
0.65 0.7 
0.6 
0.5 
0.37 
0.35 0.4 
0.29 
0.3 
0.2 
0.1 
0 
2011-12 2012-13 2013-14 2014-15 

~ - 19 - ~ 
 
DABUR 
TABLE 6 ABSOLUTE LIQUIDITY RATIO OF DABUR 

YEAR CASH & CASH EQUIVALENTS 

CURRENT LIABILITIES 
ABSOLUTE LIQUIDITY RATIO 2011-12 291.29 
1077.42 
0.27 
2012-13 391.40 
1158.44 
0.34 
2013-14 297.47 
1136.68 
0.26 
2014-15 123.94 
1259.03 
0.11 
SOURCE: BALANCE SHEETS OF DABUR LTD. 
0.35 
0.30 
0.25 
0.20 
0.15 
0.10 
0.05 
0.00 
GRAPH 8 ABSOLUTE LIQUIDITY RATIO OF DABUR 

~ - 20 - ~ 
ABSOLUTE 0.34 
LIQUIDITY RATIO OF DABUR 
0.27 
0.26 
0.11 
2011-12 2012-12 2013-14 2014-15 
 
 INTERPRETATION OF ABSOLUTE 
LIQUIDITY RATIO 
On comparing the Absolute liquidity Ratio of both the companies ITC and Dabur we can 
conclude that ITC’s Absolute liquidity Ratio increased to 0.65 in 2014-15 from 0.37 in 
2011-12, though in 2013-14 there was a drop but it managed to climb back the next year. 
Where as in case of Dabur after a rise in 2012-13 it kept falling and in 2014-15 the fall 
was much drastic to 0.11. 
0.7 
0.6 
0.65 
0.5 
0.4 
0.37 
0.27 
0.35 
0.34 
0.26 0.3 
0.29 0.2 
0.1 
0.11 
0 
2011-12 
2012-13 
2013-14 
2014-15 
GRAPH 5 COMPARING THE ABSOLUTE LIQUIDITY RATIO OF TWO COMPANIES ITC &DABUR 

~ - 21 - ~ 
ABSOLUTE LIQUIDITY RATIO ITC 
ABSOLUTE LIQUIDITY RATIO DABUR 
 
3.3.4 PROPRIETARY RATIO 
Proprietary  ratio  is  a  test  of  financial  and  credit  strength  of  the  business.  It  relates  shareholders 
fund to total assets. This ratio determines the long term or ultimate solvency of the company. 
PROPRIETARY RATIO= SHAREHOLDER’S FUND / TOTAL ASSESTS 

ITC 
TABLE 7 PROPRIETARY RATIO OF ITC 

YEAR SHAREHOLDER’S 
TOTAL ASSETS PROPRIETARY FUND 
RATIO 2011-12 
19458.58 30079.77 0.65 2012-13 22287.67 34017.43 0.66 2013-14 27236.96 40883.93 0.67 
2014-15 30735.69 44195.66 0.70 
SOURCE: BALANCE SHEETS OF ITC LTD. 

PROPRIETARY RATIO 
0.70 
0.70 
0.69 
0.68 
0.67 
0.67 
0.66 
0.65 
0.66 
0.65 
0.64 
0.63 
0.62 
2011-12 2012-13 2013-14 2014-15 
GRAPH 6 PROPRIETARY RATIO OF ITC 

~ - 22 - ~ 
 
DABUR 
TABLE 8 PROPRIETARY RATIO OF DABUR 

SHAREHOLDER’S YEAR 
FUND 
TOTAL ASSETS PROPRIETARY 
RATIO 2011-12 
1303.27 2840.71 0.46 
2012-13 1594.78 2827.89 0.56 2013-14 1902.34 3121.80 0.61 2014-15 2336.1 3688.36 0.63 
SOURCE: BALANCE SHEETS OF DABUR LTD. 

PROPRIETARY RATIO 
0.70 
0.61 
0.63 
0.60 
0.56 
0.50 
0.46 
0.40 
0.30 
0.20 
0.10 
0.00 
2011-12 2012-13 2013-14 2014-15 
GRAPH 7 PROPRIETARY RATIO OF DABUR 

~ - 23 - ~ 
 
 INTERPRETATION OF PROPRIETARY 
RATIO 
Higher  the net worth ratio better the long term solvency position of the company. From Graph 10 
(ITC)  it  is  evident  that  the ratio is conistently increasing during the period. In 2011-12 it stood at 
0.65  and  in  2014-15  it  has  reached  0.7.  In  case  of  Dabur  (Graph  11)  it  can  be  inferred  that  the 
ratios  have  been  lower  on  an  average  but  the  growth  from  2011-  12  to  2014-15  is  substantial 
with  a  total  increase  of  1.37  times.  This  ratio  indicates  the  extent  to  which  the  assets  of  the 
company can be lost without affecting the interest of thecreditors of the company 
0.8 
0.65 0.46 
0.66 0.56 
0.67 
0.61 
0.7 
0.7 
0.6 
0.5 
0.4 
0.3 
0.2 
0.1 
0 
2011-12 2012-13 2013-14 2014-15 
GRAPH 8 COMPARISON OF PROPRIETARY RATIO OF ITC & DABUR 
0.63 
PROPRIETARY RATIO ITC PROPRIETARY RATIO DABUR 

~ - 24 - ~ 
 
3.3.5 FIXED ASSETS TO EQUITY RATIO 
Fixed  assets  to  equity  ratio  measures  the  contribution  of  stockholders  and  the  contribution  of 
debt  sources  in  the  fixed  assets  of  the  company.  Other  names  of  this  ratio are fixed assets to net 
worth  ratio  and  fixed  assets  to  proprietors  fund  ratio.  If fixed assets to stockholders’ equity ratio 
is  more  than  1,  it means that stockholders’ equity is less than the fixed assets and the company is 
using  debts  to  finance  a  portion  of  fixed  assets.  If  the  ratio  is  less  than  1,  it  means  that 
stockholders’  equity  is  more  than  the  fixed  assets  and  the  stockholders’  equity  is  financing  not 
only  the  fixed  assets  but  also  a  part  of  the  working  capital.  Generally  a  ratio  of  0.60  to  0.70  is 
considered satisfactory. 
FIXED ASSETS TO EQUITY RATIO = FIXED ASSETS / STOCK HOLDERS 
EQUITY ITC 
TABLE 9 FIXED ASSETS TO EQUITY RATIO YEAR FIXED ASSETS STOCK HOLDER’S 

EQUITY 
FIXED ASSETS TO EQUITY RATIO 2011-12 12095.42 19615.67 0.62 
2012-13 12697.13 22288.58 0.57 
2013-14 15747.20 27439.99 0.58 
2014-15 16292.63 30735.69 1.8 
SOURCE: BALANCE SHEETS OF ITC LTD. 

FIXED ASSETS TO EQUITY RATIO ITC 

GRAPH9 FIXED ASSETS TO EQUITY RATIO 
1.8 1.8 1.6 1.4 1.2 1 0.8 
0.62 0.6 
0.57 0.58 
0.4 0.2 0 
2011-12 2012-13 2013-14 2014-15 

~ - 25 - ~ 
 
0.46 0.5 
0.4 
0.39 
0.35 
0.3 
0.29 
0.2 
0.1 
0 
2011-12 
2012-13 
2013-14 
2014-15 

FIXED ASSETS TO EQUITY RATIO DABUR 

DABUR 
TABLE 10 FIXED ASSETS TO EQUITY RATIO OF DABUR 

YEAR FIXED ASSETS STOCK HOLDER’S 

EQUITY 
FIXED ASSETS TO EQUITY RATIO 
2011-12  596.91  1303.27  0.46  2012-13  633.65  1594.78  0.39  2013-14  670.38 
1902.34 0.35 2014-15 694.74 2336.19 0.29 
SOURCE: BALANCE SHEETS OF DABUR LTD. 
GRAPH 10 FIXED ASSETS TO EQUITY RATIO 

~ - 26 - ~ 
 
INTERPRETATION OF FIXED ASSETS TO 
EQUITY 
RATIO 
An analysis of Graph 13 (ITC) conveys that this ratio has always been ‘satisfactory’ that is above 
0.60 times. Although it has dropped between the years 2012 to ’14, it climbed up to a massive 
1.8 times in the financial year 2014-15. It means that stockholders’ equity is less than the fixed 
assets and the company is using debts to finance a portion of fixed assets. Contradictorily 
Dabur’s FA to Equity Ratio (in Graph 14) is seen to be decreasing continuously and it has 
dropped to a mere 0.29 in the F.Y. 2014-15, 6.2 times lower than that of ITC. Since it has 
always been much lower than unity , it means that stockholders’ equity of Dabur is more than the 
fixed assets and the stockholders’ equity is financing not only the fixed assets but also a part of 
the working capital. 
2014-15 
2013-14 
0.58 
2012-13 
0.57 
2011-12 
0.62 
GRAPH 11 COMPARISON OF FIXED ASSETS TO EQUITY RATIO OF DABUR &ITC 
0 
0.5 
1 
1.5 
2 
0.29 
1.8 
0.35 
FIXED ASSETS TO STOCKHOLDER’S EQUITY RATIO DABUR 
0.39 
FIXED ASSETS TO STOCKHOLDER’S 
0.46 
EQUITY RATIO ITC 

~ - 27 - ~ 
 
3.3.6 DEBT- EQUITY RATIO 
Debt/Equity  Ratio  is  a  debt  ratio  used  to  measure  a  company's  financial  leverage, 
calculated  by  dividing  a  company’s  total  liabilities  by  its  stockholders'  equity.  The  D/E  ratio 
indicates  how  much  debt  a  company  is  using  to  finance its assets relative to the amount of value 
represented  in  shareholders’  equity. For most companies the maximum acceptable debt-to-equity 
ratio  is  1.5-2  and  less.  For  large  public  companies  the  debt-to-equity  ratio  may  be  much  more 
than 2, but for most small and medium companies it is not acceptable. 
DEBT - EQUITY RATIO = TOTAL LIABILITIES / SHAREHOLDERS' EQUITY 

ITC 
TABLE 11 DEBT-EQUITY RATIO OF ITC YEAR TOTAL 
LIABILITIES SHAREHOLDERS' 
EQUITY 
DEBT- EQUITY RATIO 
2011-12  10464.1  19615.67  0.53  2012-13  11728.6  22288.58  0.54  2013-14  13443.94  27439.99 
0.49 
2014-15 13459.97 30735.69 0.44 
SOURCE: BALANCE SHEETS OF DABUR LTD. 

DEBT- EQUITY RATIO ITC 

0.6 
0.54 
0.5 
0.49 
0.44 
0.4 
0.3 
0.2 
0.1 
0 
2011-12 2012-13 2013-14 2014-15 
GRAPH 12 DEBT EQUITY RATIO OF ITC 
0.53 

~ - 28 - ~ 
DEBT- EQUITY RATIO ITC 
 
DABUR 
TABLE 12 DEBT EQUITY RATIO OF DABUR 

YEAR TOTAL 
LIABILITIES 
SHAREHOLDERS' EQUITY 
DEBT- EQUITY RATIO 
2011-12 1537.44 1303.27 1.18 
2012-13 1233.11 1594.78 0.77 2013-14 1219.46 1902.34 0.64 
2014-15 1352.17 2336.19 0.58 
SOURCE: BALANCE SHEETS OF DABUR LTD. 

DEBT- EQUITY RATIO DABUR 

1.18 1.2 
1 
0.77 0.8 
0.64 
0.58 
0.6 
0.4 
0.2 
0 
2011-12 2012-13 2013-14 2014-15 
GRAPH 17 DEBT EQUITY RATIO OF DABUR 

~ - 29 - ~ 
 
INTERPRETATION OF DEBT-EQUITY 
RATIO 
In  Graph  16,  the  debt  to  equity  ratio  of  ITC  ltd.  in  2011-12  (at  1.18  times)  can  be  called 
unsatisfactory  as  a  higher  ratio  indicates  that  the  outside  debts  or  liabilities  are  more  than  the 
shareholders’  funds,  further  indicating that the state of long term creditors are more and financial 
structure  is  a  bit  weak.  Although  in  the  subsequent  years  the  ratio  has  dropped  and  reached  its 
lowest  at  0.58  in  2014-15  to  an  acceptable  level.  Dabur’s  position  in  terms  of  Debt  and  Equity 
(In  Graph 17) is more or less consistent throughout these years with a slight drop towards the last 
two financial years. 
1.4 
1.2 
1.18 
1 
0.8 
0.77 
0.6 
0.64 0.53 0.54 
0.49 
0.58 
0.4 
0.44 
0.2 
0 
2011-12 2012-13 2013-14 2014-15 
GRAPH 13 COMPARISON OF DEBT EQUITY SHARE BETWEEN DABUR AND ITC 

~ - 30 - ~ 
DEBT- EQUITY RATIO ITC 
DEBT- EQUITY RATIO DABUR 
 
3.3.7 NET PROFIT RATIO 
Net  profit  ratio (NP ratio) is a popular profitability ratio that shows relationship between 
net  profit  after  tax  and  net  sales.  It  is computed by dividing the net profit (after tax) by net sales. 
For  the  purpose  of  this  ratio,  net  profit  is  equal  to  gross  profit  minus  operating  expenses  and 
income  tax.  All  non-operating  revenues  and  expenses  are  not  taken  into  account  because  the 
purpose  of  this  ratio  is  to  evaluate  the  profitability  of  the  business  from  its  primary  operations. 
There  is  no  norm  to  interpret  this  ratio.  To  see  whether  the  business  is  constantly  improving  its 
profitability  or  not,  the  analyst  should  compare  the  ratio  with  the  previous  years’  ratio,  the 
industry’s  average  and  the  budgeted  net  profit  ratio.  The  use  of  net  profit  ratio  in  conjunction 
with  the  assets  turnover  ratio  helps  in  ascertaining  how  profitably  the  assets  have  been  used 
during the period. 
NET PROFIT RATIO = NET PROFIT AFTER TAX / NET SALES 

ITC 
TABLE 13 NET PROFIT RATIO OF ITC YEAR NET PROFIT AFTER TAX 

NET SALES NET PROFIT 

RATIO 2011-12 
6322.39 26179.52 0.24 2012-13 7418.39 29605.58 0.25 
2013-14 8990.62 34948.70 0.26 2014-15 9607.73 36083.21 0.26 
SOURCE: PROFIT AND LOSS STATEMENT OF ITC LTD. 

NET PROFIT RATIO ITC 

0.265 
0.26 0.26 0.26 
0.255 
0.25 
0.245 
0.24 
0.235 
0.23 
2011-12 2012-13 2013-14 2014-15 
GRAPH 14 NET PROFIT RATIO OF ITC 
0.24 
0.25 
~ - 31 - ~ 
 
DABUR 
TABLE 14 NET PROFIT RATIO OF DABUR 

YEAR NET PROFIT AFTER TAX 

NET SALES NET PROFIT 
RATIO 
2011-12 463.24 3759.33 0.12 
2012-13 590.98 4349.39 0.14 
2013-14 672.10 4870.08 0.14 
2014-15 762.58 5431.28 0.14 
SOURCE: PROFIT AND LOSS STATEMENTS OF DABUR LTD. 

NET PROFIT RATIO DABUR 

0.14 
0.14 
0.14 
0.14 
0.135 
0.13 
0.125 
0.12 
0.12 
0.115 
0.11 
2011-12 2012-13 2013-14 2014-15 
GRAPH 15 NET PROFIT RATIO OF DABUR 

~ - 32 - ~ 
 
INTERPRETATION OF NET PROFIT RATIO 
From 0.24 times in 2011-12 the NP margin of ITC has increased to 0.26 with an average growth 
rate of 4.15% each year. Although it is not huge, it indicates a positive advancement. In contrast 
to ITC’s figures the Net Profi Ratios of Dabur (Graph 2.1) have been almost 0.5 times lower. 
Further the ratio has elevated during the 1st year but subsequently been stagnant at 0.14 from FY 
2012-13 to 2014-15. The constant net margin rate does not denote the company is improving its 
profitability but also does not show any decline. However a higher growth rate is anticipated. 
0.3 
0.24 
0.25 
0.26 
0.26 
0.25 
0.2 
0.15 
0.12 
0.14 0.14 
0.14 
0.1 
0.05 
0 
2011-12 2012-13 2013-14 2014-15 
GRAPH 16 COMPARISON OF NET PROFIT RATIO OF DABUR & ITC 

~ - 33 - ~ 
NET PROFIT RATIO ITC 
NET PROFIT RATIO DABUR 
 
3.3.8 OPERATING PROFIT RATIO 
The operating profit ratio indicates how much profit a company makes after paying for 
variable costs of production such as wages, raw materials, etc. It is expressed as a percentage of 
sales and shows the efficiency of a company controlling the costs and expenses associated with 
business operations. The operating profit margin ratio is a key indicator for investors and 
creditors to see how businesses are supporting their operations. If a company requires both 
operating and non-operating income to cover the operation expenses, it shows that the business' 
operating activities are not sustainable. A higher operating margin is more favorable compared 
with a lower ratio because this shows that the company is making enough money from its 
ongoing operations to pay for its variable costs as well as its fixed costs. 
OPERATING PROFIT RATIO = OPERATING PROFIT / NET SALES 

ITC 
TABLE 15 OPERATING PROFIT RATIO OF ITC 

YEAR OPERATING 
PROFIT 
NET SALES OPERATING 
PROFIT RATIO 2011-12 
9168.15 26179.52 0.35 2012-13 10684.18 29605.58 0.36 2013-14 13051.55 34948.70 0.37 
2014-15 13997.52 36083.21 0.39 
SOURCE: PROFIT AND LOSS STATEMENTS OF ITC LTD. 

OPERATING PROFIT RATIO ITC 

0.4 0.39 0.38 0.37 0.36 0.35 0.34 0.33 0.32 
2011-12 2012-13 2013-14 2014-15 
GRAPH 17 OPERATING PROFIT RATIO OF ITC 

~ - 34 - ~ 
OPERATING PROFIT RATIO ITC 
 
DABUR 
TABLE 16 OPERATING PROFIT RATIO OF DABUR 

YEAR OPERATING 
PROFIT 
NET SALES OPERATING 
PROFIT RATIO 
2011-12 631.92 3759.33 0.17 2012-13 749.67 4349.39 0.17 2013-14 862.05 4870.08 0.18 
2014-15 976.53 5431.28 0.18 
SOURCE: PROFIT AND LOSS STATEMENTS OF DABUR LTD. 

OPERATING PROFIT RATIO DABUR 0.185 

0.18 
0.175 
0.17 
0.165 
0.16 
0.155 
2011-12 2012-13 2013-14 2014-15 
GRAPH 18 OPERATING PROFIT RATIO OF DABUR 

~ - 35 - ~ 
OPERATING PROFIT RATIO DABUR 
Poly. (OPERATING PROFIT RATIO DABUR) 
 
INTERPRETATION OF OPERATING PROFIT 
RATIO 
On  comparing  the  Operating  Profit Ratio of both the companies ITC and Dabur we can conclude 
that  ITC’s  Operating  Profit  Ratio  increased  to  0.39  in  2014-15  from  0.35  in  2011-12  ;  and 
Dabur’s  from  0.17  in  2011-12  to  0.18  in  2014-15.  ITC’s  higher  margins  indicates  that  the 
company  is  making  more  money  from  its  ongoing operations to pay for its variable costs as well 
as  its  fixed  costs  than that of Dabur. Also the rate of increase of this ratio is a bit sluggish in case 
of Dabur. 
0.4 
0.35 
0.36 
0.37 
0.39 
0.35 
0.3 
0.25 
0.17 0.17 
0.18 0.18 
0.2 
0.15 
0.1 
0.05 
0 
2011-12 2012-13 2013-14 2014-15 
GRAPH 19 COMPARISON OPERATING PROFIT RATIO OF DABUR & ITC 
OPERATING PROFIT RATIO ITC OPERATING PROFIT RATIO DABUR 

~ - 36 - ~ 
 
ITC 
3.3.9 RETURN ON EQUITY RATIO 
Return  on  equity  or  return  on  capital  is  the  ratio  of  net  income  of  a  business  during a year to its 
stockholders'  equity  during that year. It is a measure of profitability of stockholders' investments. 
It  shows  net  income  as  percentage  of  shareholder  equity.  Net  income  is  the  after  tax  income 
whereas  average  shareholders'  equity  is  calculated  by dividing the sum of shareholders' equity at 
the  beginning  and  at  the  end  of  the  year  by  2.  Return  on  equity  is  an  important  measure  of  the 
profitability  of  a  company.  Higher  values  are  generally  favorable  meaning  that  the  company  is 
efficient  in  generating  income  on  new  investment.  Investors  should  compare  the  ROE  of 
different  companies  and also check the trend in ROE over time. However, relying solely on ROE 
for investment decisions is not safe. It can be artificially influenced by the management. 
RETURN ON EQUITY RATIO = NET INCOME / SHAREHOLDERS’ EQUITY 
TABLE 17 RETURN ON EQUITY RATIO OF ITC YEAR NET INCOME 
SHAREHOLDERS' 

EQUITY 
RETURN ON EQUITY RATIO 2011-12 6258.14 19615.67 0.32 2012-13 7418.39 22288.58 
0.33 2013-14 8891.38 27439.99 0.32 2014-15 9607.73 30735.69 0.31 
SOURCE: BALANCE SHEET AND P/L STATEMENT OF ITC LTD 

0.335 
0.33 
0.33 
0.325 
0.32 
0.32 
0.32 
0.315 
0.31 
0.31 
0.305 
0.3 
2011-12 2012-13 2013-14 2014-15 
GRAPH 20 RETURN ON EQUITY RATIO OF ITC 
~ - 37 - ~ 
2011-12 
2012-13 
2013-14 
2014-15 
 
DABUR 
TABLE 18 RETURN ON EQUITY RATIO OF DABUR 

YEAR NET INCOME SHAREHOLDERS’ 

EQUITY 
RETURN ON EQUITY RATIO 2011-12 463.24 1303.27 0.36 
2012-13 590.98 1594.78 0.37 
2013-14 672.10 1902.34 0.35 
2014-15 762.58 2336.19 0.32 
SOURCE: BALANCE SHEET AND P/L STATEMENT OF DABUR LTD. 
0.38 
0.37 0.37 
0.36 
0.35 0.35 
0.34 
0.33 
0.32 0.32 
0.31 
0.3 
0.29 
2011-12 2012-13 2013-14 2014-15 
GRAPH 21 RETURN ON EQUITY RATIO OF DABUR 

~ - 38 - ~ 
0.36 
RETURN ON EQUITY RATIO DABUR 
 
INTERPRETATION OF RETURN ON EQUITY 
RATIO 
From the analysis (Graph 27) it shows that Dabur Ltd. has higher return on equity than ITC ltd. 
However in contrast to the previous years the ROE of Dabur has drastically decreased in 2014- 
15 and the possible cause of this occurrence is the lower net income between 2013 to 2015 
0.37 0.37 
0.36 
RETURN ON EQUITY RATIO ITC 
0.36 
0.35 0.35 
RETURN ON EQUITY RATIO 
DABUR 0.34 
0.33 0.33 
0.32 
0.32 
0.32 0.32 
0.31 0.31 
0.3 
0.29 
0.28 
2011-12 2012-13 2013-14 2014-15 
GRAPH 22 COMPARISON OF RETURN ON EQUITY RATIO OF DABUR & ITC 

~ - 39 - ~ 
 
3.3.10 EARNINGS PER SHARE RATIO (EPS) 
Earnings  per  share,  also  called  net  income  per  share,  is  a  market prospect ratio that measures the amount 
of  net  income  earned  per  share  of  stock  outstanding..  Earnings  per  share  is  also  a  calculation  that shows 
how  profitable  a  company  is  on  a  shareholder  basis.  So  a  larger  company's  profits  per  share  can  be 
compared  to smaller company's profits per share. Obviously, this calculation is heavily influenced on how 
many  shares  are  outstanding.  Thus,  a  larger  company  will  have  to  split  its  earning  amongst  many  more 
shares  of  stock  compared  to  a  smaller  company.  Earnings  per  share  is  the  same  as  any  profitability  or 
market  prospect  ratio. Higher earnings per share is always better than a lower ratio because this means the 
company is more profitable and the company has more profits to distribute to its shareholders. 
EPS = NET INCOME / AVERAGE OUTSTANDING COMMON SHARES ITC 
TABLE 19 EARNINGS PER RATIO OF ITC YEAR NET INCOME AVERAGE 

OUTSTANDING COMMON SHARE 

SOURCE: BALANCE SHEETS AND P/L STATEMENT OF ITC LTD. 
GRAPH 23 EARNINGS PER SHARE RATIO OF ITC 

EARNINGS PER SHARE RATIO 

2011-12 6258.14 97.12 64.43 2012-13 7418.39 83.61 88.73 2013-14 8891.38 70.88 125.44 
2014-15 9607.73 66.52 144.43 

EARNINGS PER SHARE RATIO ITC 

160 
144.43 
140 
125.44 
120 
100 
64.43 
88.73 
80 
60 
40 
20 
0 
2011-12 2012-13 2013-14 2014-15 

~ - 40 - ~ 
 
YEAR NET INCOME AVERAGE 
OUTSTANDING COMMON SHARE 
EARNINGS PER SHARE RATIO 
2011-12 463.24 65.49 7.07 
2012-13 590.98 51.41 11.50 2013-14 672.10 45.29 14.84 2014-15 762.58 40.38 18.88 

EARNINGS PER SHARE RATIO DABUR 

20 
18.88 
18 
11.50 
14.84 16 14 
7.07 
12 10 8 6 4 2 0 
2011-12 2012-13 2013-14 2014-15 

DABUR 
TABLE 20 EARNINGS PER SHARE RATIO OF DABUR 
SOURCE: BALANCE SHEETS AND P/L OF DABUR LTD 
TABLE 24 EARNINGS PER SHARE RATIO OF DABUR 

~ - 41 - ~ 
 
INTERPRETATION OF EARNINGS PER 
SHARE RATIO 
From  Graph  29  (Dabur)  it  is  apparent  that  Earnings  per  share  of  the  company  has  drastically 
improved  throughout  the  time span and reached its pinnacle at 18.88 in 2014-15. ITC (Graph 28) 
has  also  improved  in  terms  of  EPS  with  a  sharp  ascent  during  the  year  2012-13.  A comparative 
analysis  in  Graph  30  below,  depicts  that  the  overall  ratio  of Dabur is higher than that of ITC but 
the rate of increase in both the companies is commendable. 
180 
160 
140 
120 
100 
80 
60 
40 
20 
0 
2011-12 2012-13 2013-14 2014-15 
GRAPH 25 COMPARISON OF EARNING PER SHARE RATIO OF DABUR & ITC 

~ - 42 - ~ 
EARNINGS PER SHARE RATIO DABUR 
EARNINGS PER SHARE RATIO ITC 
 
 4. CONCLUSIONS AND 
RECOMMENDATIONS 
4.1 SUMMARY OBSERVATIONS: 
TABLE 21 SUMMARY OF ALL THE RATIOS ANALYSED IN TABULAR FORM FOR THE LAST 4 
FINANCIAL YEARS 

2011-12 2012-13 2013-14 2014-15 

ITC DABUR ITC DABUR ITC DABUR ITC DABUR CURRENT 
RATIO 1.60 1.51 1.79 1.49 1.89 1.73 2.05 1.25 
LIQUID RATIO 0.51 0.60 0.51 0.59 0.56 0.62 0.84 0.46 
ABSOLUTE LIQUIDITY RATIO 
0.37 0.27 0.35 0.34 0.29 0.26 0.65 0.11 
PROPRIETARY RATIO 0.65 0.46 0.66 0.56 0.67 0.61 0.70 0.63 
FIXED ASSETS TO EQUITY RATIO 
0.62 0.46 0.57 0.39 0.58 0.35 1.8 0.29 
DEBT-EQUITY RATIO 0.53 1.18 0.54 0.77 0.49 0.64 0.44 0.58 
NET PROFIT RATIO 0.24 0.12 0.25 0.14 0.26 0.14 0.26 0.14 
OPERATING PROFIT RATIO 
0.35 0.17 0.36 0.17 0.37 0.18 0.39 0.18 
RETURN ON EQUITY RATIO 
0.32 0.36 0.33 0.37 0.32 0.35 0.31 0.32 
EARNINGS PER SHARE RATIO 
64.43 7.07 88.73 11.50 125.44 14.84 144.43 18.88 
SOURCE: FINANCIAL STATEMENTS OF ITC AND DABUR 

The following are, in brief the inferences drawn from the data analysis and calculations 
made in this study: 
▪ Current ratio of ITC is seen to have escalated in the time span whereas for DABUR it has kept 
drooping. So it can be said that ITC Ltd. has a much better solvency position. 
▪  ITC’s  liquid  ratio  has  increased  over  the  years  and  in  case  of  Dabur  quick  ratio  is  seen  to 
decrease  especially  during  the  last  two financial years which shows that the firm has been facing 
some  problems  regarding  paying  short  term  liabilities  for  3  years.  Since  a  higher  quick  ratio  is 
always anticipated ITC is in a better position. 
~ - 43 - ~ 
 
▪  The  trend  of  absolute  liquidity  ratio  shows  that  for  both  the  companies  it  has  been fluctuating 
throughout  the  period  but  the  drop  in  the  last  financial  year  is  especially  high  for  Dabur 
indicating an unsound liquidity position. 
▪ An upward trend in the proprietary ratios of both the companies shows that the long term or 
ultimate solvency of the company is good and getting better. 
▪  The  fixed  asset  to  equity  ratio  of  ITC  has  been  satisfactory  that  is  around  0.6.  However 
Dabur’s  ratio  has  kept decreasing meaning that stockholders’ equity is more than the fixed assets 
and  the  stockholders’  equity  is  financing  not  only  the  fixed  assets  but  also a part of the working 
capital. 
▪  The  Net  profit  and  Operating profit ratios depicts that the ratios of Dabur have been almost 0.5 
times  less  than  that  of  ITC.  Morover  the  former  company  fails  to  increase its profitability in the 
last few years 
▪  The  trend  of  ratios  shows that Dabur Ltd. has higher return on equity than ITC ltd. However in 
contrast  to  the  previous  years  the  ROE  of  Dabur  has  drastically  decreased  in  and  the  possible 
cause of this occurrence is the lower net income between the last 2-3 years. 
▪ The overall Earnings per ratio of Dabur is higher than that of ITC but the rate of increase in 
both the companies is commendable. 
▪  It  can  further  be  concluded  that  in terms of solvency and liquidity ITC Ltd. is showing a better 
trend  but  in  terms  of  profitability  Dabur  Ltd.  surpasses  the  former  marginally,  if  not 
considerably. 

4.2 RECOMMENDATIONS FOR IMPROVEMENT 

Financial  analysis  is  the  process  of  selecting  and  evaluating  the  relationship 
between  component  part  of  financial  statement  to  obtain  a  better  understanding  of  the  firms’ 
position  and  performance.  This  financial  analysis  is  done  using the tools of ratio analysis. These 
tools  show  us  the  company  position  in  terms  of  liquidity  profitability,  solvency, bankruptcy and 
stability. By using these tools we came to the conclusion that the companies should improve their 
revenue  from  operations  or  sales  by  adopting  better  marketing  techniques  and  procedures. They 
should  also  try  to  expand  the  geographical  market  by  trying  to  gain  strong  hold  in  the  foreign 
countries. Dabur Ltd. especially is far behind of ITC in this aspect. Further Dabur Ltd. is advised 
~ - 44 - ~ 
 
to  cope  up  and  compete  with  its  competitors in the FMCG market by introducing new and better 
line  of  products.  Both  the  companies  are  advised  to  improve  upon  the  solvency  and  liquidity 
position  as  they  are  responsible  for  creating  a  significant  impact  in  the  minds  of  the  potential 
investors and other interested parties. 
In the changing economy scenario the financial performance has to be better. Even though the 
firms’ profitability, liquidity and other positions are somewhat satisfactory it can reach even 
higher positions and better stability if the above said suggestions are considered. 

4.3 LIMITATIONS OF THE STUDY 

• The study is done within a period of four months only (Oct-Jan), so some additional financial 
analyses are not covered in this study. 
• Further the period of study is of 4 financial years only. So this conclusions are not exhaustive. 
• Due to the time constraint, all the financial ratios could not be analyzed. 
• The financial statement and annual reports were used; hence the data collected is secondary** 
in nature. 
• Ratios are only post-mortem of what happened between two balance sheet data. 
• Ratio analysis is based on accounting not economic data so its credibility is questioned by some 
users. 
•  They  reveal  only the past performance of firm, it is not necessary that the same conditions have 
to  be  repeated  in  the  future.  Past  performance  (good  or  bad)  is  not  a  perfect  indicator  of  future 
performance. 
**Due to the busy schedules of the high officials of the companies the collection of primary data 
was not possible. As such, this project report is restricted to the use of secondary data. 
~ - 45 - ~ 
 
4.4 SCOPE FOR FURTHER RESEARCH 
In light of the limitations specified earlier it can be said there was, and there is ample 
scope for further research in this aspect and topic. Apart from the 10 ratios analyzed in 
this project there are several other financial ratios that can be calculated and assessed to 
present a clearer picture of the financial stability of the two companies. Also there are 
other techniques (like common size balance sheet) for comparison and assessment of 
financial statements other the conventional ratio analysis. The study can also be 
conducted for a much larger time bracket which would facilitate the investors to make 
more prudent and informed decisions. Apart from this use of secondary data if accessible 
can improve the credibility of the calculations and results obtained as it will be free from 
any manipulative figures from the internal management of the companies. 
~ - 46 - ~ 
 
BIBLIOGRAPHY 
• Besley, S., Brigham, E. F., & Besley, S. (1999). Principles of finance. Fort Worth: 
Dryden Press. 
• Birchall, A. (1991). Ratio analysis. Financial Analysis and Control, 30-53. 
• Bull, B., & McNeill, D. (2007). Development issues in global governance: Public-private 
partnerships and market multilateralism. London: Routledge. 
• Chen, K. H., & Shimerda, T. A. (1981). An Empirical Analysis of Useful Financial 
Ratios. Financial Management, 10(1), 51. 
• Drake, P. P., & Fabozzi, F. J. (2008). Financial Ratio Interpretation. Handbook of Finance. 
• Duncan, E., & Elliott, G. (2004). Efficiency, customer service and financial performance 
among Australian financial institutions. Intl Jnl of Bank Marketing International Journal 
of Bank Marketing, 22(5), 319-342. 
• Financial Ratio Analysis. (2011). The Basics of Finance An Introduction to Financial 
Markets, Business Finance, and Portfolio Management, 243-274. 
• Financial Ratios: Technical Analysis of Financial Markets. (n.d.). Retrieved January 17, 
2016, from http://www.finpipe.com/financial-ratios-analysis/ 
• Horrigan, J. O. (1978). Financial ratio analysis: An historical perspective. New York: 
Arno Press. 
• Ratio Analysis: Using Financial Ratios | Investopedia. (2003). Retrieved January 8, 2016, 
from http://www.investopedia.com/university/ratio-analysis/using-ratios.asp 
• Scherer, F. M. (2008). The World Productivity Growth Slump. Organizing Industrial 
Development. 
~ VIII ~ 
 
Annexure II- A 
Financial Statements of ITC Ltd. 
~ IX ~ 
 
~ X ~ 
 
Annexure II – B 
Financial Statements of Dabur India Ltd. 
~ XI ~ 
 
~ XII ~