CERTIFICATE -I
 

            This is to certify that the project report entitled “Comparative Analysis of

Nestle V/S Cadbury” undertaken at “Nestle India Ltd.” is a bonafide work carried
out by “Lalita Kumari” for partial fulfillment of the requirements for Master in
Commerce (M.Com) during the academic year 2005 - 2007 under my supervision
and guidance.

            It is also certified that the form and content of the above mentioned project are
original and have not been submitted in any part or full, for any other degree or
diploma of this organization or other organization/institute/university according to the
best of my knowledge and belief.

                     I am fully satisfied with her work & wish her Best of Luck in future
endeavors.

Internal Examiner                                                           External Examiner

Prof. Avtar Singh

Major Advisor &

Head of Commerce Department

G.T.B.National College, Dakha

ACKNOWLEDGEMENT
          It was indeed a great pleasure & a most cherish able learning experience for me
in acknowledging valuable assistance & cooperation by people around me. “If words
are considered as symbol of approval & token of appreciation then let the words play
the heralding role of expressing my gratitude”.

            First of all I am thankful to almighty God & my dear parents because

without their blessings this project was not possible for me.

         “No endeavor is a one man show”, it is a contributing effort of all those who
helped me directly or indirectly in completion of this project. I wish to take this
opportunity to express our deepest & immense thanks to all the talented people who
contributed to this project by providing their valuable guidance.

          I am extremely grateful to Mr. Paul Stienkamp (Factory Manager), Mr.

Mahesh Karandikar (H.R. Manager) & Mr.J.K.Singla (Finance Manager) of
“Nestle India Ltd.” for providing valuable information in spite of their busy
schedules.

       My sincere thanks to Prof. Avtar Singh for his encouragement & continuous
support which has made me to abstain from being hackneyed by showing me a new
way & whole new dimensions in the analysis and design of my project.

                     Last but not the least I would like to thanks to all of them who helped me
directly or indirectly in completion of this project by their brains, hearts & hands from
core of my heart.

In the end, I can state about my practical training in brief by recalling the
ancient Chinese proverb:
“I hear, I forgot…  I see, I remember…. I do, I
understand…”        
 

Lalita Kumari
M.Com. (2nd Sem)

Annexure 
Title of the
Thesis/Dissertation        
: “Comparative Analysis
Of Nestle V/S Cadbury” 

Name of Student    : Lalita Kumari. 

Registration No.    : 02-GTD-53. 

Name & Designation of Advisor : S. Avtar Singh.

      (Professor)

Degree to Be Awarded   : M.Com. 

Session      : 2005-2007. 

Name of University    : Panjab University,

      Chandigarh.

PREFACE
This report is basically undertaken to meet two main objectives. The first serves to
bridge the gap between practical aspects & theoretical knowledge. The second being
the syllabus requirements for the post graduate degree in Commerce (M.Com) course
of Panjab University, Chandigarh. As a part of M.Com, a student has to pursue a
project duly approved by the director of the institute. I had the privilege of
undertaking a project on “Comparative Analysis of Nestle V/S Cadbury”At “Nestle
India Ltd.”

            This project was undertaken to make the analysis of financial statement & also
to get an experience of working with the concern itself.

This project is divided into “12 Chapters” which cover different aspects relating to
this project. I hope that this project gives the reader an overview about Analysis of
financial statements of “Nestle India Ltd.” & “Cadbury”: 

CHAPTER 1  Deals with Introduction & History of Nestle in detail.

CHAPTER  2 Deals with Nestle in

India.                                                                                                 

CHAPTER  3 Deals with Introduction & features of Moga

Factory.                 

CHAPTER 4 Deals with Introduction, History, Products,

Brands & Historical Development of Cadbury in detail.

CHAPTER  5 Deals with Objectives of Analysis of financial statements.  

CHAPTER  6 Deals with Ratio Analysis.

CHAPTER  7 Deals with SWOT Analysis.

CHAPTER  8 Deals with Best Performing Firm with Reasons.

CHAPTER  9 Deals with Research Methodology.

CHAPTER  10 Deals with limitations & findings of study.

CHAPTER  11 Deals with Appendix containing Financial Statements.

CHAPTER 12     Gives an idea about Websites visited & Book referred.         

TABLE OF CONTENTS
Chapter Description Page
No. No
Chapter 1 INTRODUCTION & HISTORY TO NESTLE.  
Chapter 2 NESTLE IN INDIA.  
Chapter 3 INTRODUCTION & SALIENT FEATURES OF MOGA  
FACTORY.
Chapter 4 INTRODUCTION & HISTORY TO CADBURY.  
Chapter 5 OBJECTIVES OF ANALYSIS OF FINANCIAL STATEMENTS.  

Chapter 6 RATIO ANALYSIS.  

Chapter 7 SWOT ANALYSIS.  

Chapter 8 CONCLUSION:  

a. BEST PERFORMANCE COMPANY FROM

SHAREHOLDER PERSPECTIVE.

a. REASON FOR GOOD PERFOMANCE

Chapter 9 RESEARCH METHODOLOGY.  

Chapter LIMITATIONS & FINDINGS OF STUDY.  
10
  APPENDIX:  
Chapter
11 BALANCE SHEETS.

PROFIT & LOSS A/C.

Chapter BIBLIOGRAPHY.  
12

INTRODUCTION

(HENRY NESTLE - FOUNDER OF NESTLE)

(1814 – 1890) 

NESTLE’S PROFILE  
Nestle India is a multinational company with its worldwide operations in over 84
countries. Nestle is the world’s largest food company with its international
headquarters at Vevey, Switzerland. Nestle has almost 500 factories world wide out of
which 220 are located in Europe, 150 in America and 130 in Africa, Asia and
Oceania. It employs almost 2,30,000 people. 

         Founder of Nestle was German born “Henry Nestle” who was living in a small
town of Switzerland named “Vevey”. From a modest beginning he founded the
company in 1866 at Switzerland for manufacturing milk powders for babies.
“Necessity is mother of invention” is applicable in the   invention of a special food
product “Farine Lactee” made from Cereals & milk to saved the lives of many
infants because, at that time Switzerland faced one of the highest infant mortality rate
& the milk formula act as nectar that saved the lives of many infants whose mothers
were un-able to breast feed successfully. Since than Company have always looked
forward and have achieved set targets & goals.

            At present Nestle is the world’s largest food company, with its international
head quarters at Vevey, in Switzerland. Nestlé is often quoted by most as
“Multinational of Multinationals.” There is a good reason, as less than 2% of the
turnover comes from domestic market in Switzerland.

                Nestlé is very much decentralized in its operations & most of the markets
are given considerable autonomy in its operation. It is more of a people & products
oriented company rather than systems oriented company. There are “unwritten
guidelines” which are to be followed, based on common senses & a strong set of
moral principals emphasizing a lot of respect for fellow beings. Nestle has always
adapted to the local conditions and at the same time integrates its Swiss heritage. It
has always taken a long-term view in the countries in which it operates.

            Therefore, one can see a lot of investment R&D and risk taken in new product
areas. There is a great emphasis placed on training by the company. It believes in
rewarding and promoting people from within.

            Today its product brand name ‘Nestle’ is associated with ‘quality products’ in
worldwide consumer markets.

             Nestle

The Nest       
            When Henry Nestle introduced the first commercial infant formula in 1867, he
also created a symbol of the “Bird’s Nest”, graphic translation of his name, which
personifies the company’s business. The symbol, which is universally understood,
evokes security, motherhood and affection, nature and nourishment, family and
tradition. Today it is the central element of Nestlé’s corporate identity and closely
parallels the company’s corporate values and culture.

PLANT LOCATIONS
Moga (Panjab)   : Milkmaid,Culinary,Cerelac,1962

Choladi (Tamilnadu)  : Instant Tea Export ,1969

Nanjangud (Karnatka)  : Coffee & Milo ,1989

Samalkha (Haryana)  : Cereals, Milkmaid Deserts ,1992

Ponda (Goa)   : Chocolates & Confectionery, 1995

Bicholim (Goa)   : Noodles and Cold Sauces, 1997

Pant Nagar (Uttaranchal) :  Noodles and Coffee,2006 

           Beginning with its first investment in Moga(Panjab) in 1961. Other factories
were set up at Choladi (Tamil Nadu) in 1969, at Nanajangad (Karnataka) in 1989, at
Samlakha (Haryana) in 1992, at Ponda(Goa) in 1995, at Bicholim (Goa) in 1997.

  Nestle India is now putting up the 7th factory at Pant Nagar in Uttaranchal.

PRODUCT RANGE OF NESTLÉ  

Its activities include manufacturing and marketing of: -            

 Condensed Milk
 Powdered Milk
 Ice Creams
 Other Dairy Products
 Infant Foods
 Chocolates & Confectionery Items
  Tea & Coffee
 Culinary Products
 Frozen Products
 Fruit Juices
 Mineral Water
 Pet Foods
 Pharmaceuticals And Cosmetics

NESTLE`S ORGANIZATION
            Some names seem to belong to legend and Nestlé now synonymous with a
prestigious trademark and world’s foremost food group originally consisted of two
companies Henri Nestle of Vevey Switzerland & Anglo Swiss Condensed Milk
Company in Cham. Both companies competed vigorously from 1866- 1905. These
groups merged in 1905 and become the starting point of the recent food group with
development of different products as well as acquisitions, mergers and purchasing of
interests in other companies. 

            Nestle is now the No. 1 food company in the world. It is present on all five
continents has an annual turnover of nearly 80 Billion Swiss Francs. At present there
are around 500 factories in around 84 countries with 200 operating companies, One
basic research center & 17 technological development groups and has in excess of 
200,000 employees. Currently Mr. PAUL STIENKAMP is controller the Nestlé
group. 

Nestlé  operations worldwide are divides into 3 zones:

 ZONE EUR  : Europe

 ZONE AOA  : Asia and Oceania
 ZONE AMS  : Americas

            India comes under zone AOA which includes South- East Asian trading
giants of the likes of Thailand, Indonesia, Malaysia, Singapore, China etc.

 
ORGANISATION STRUCTURE OF
“NESTLE INDIA LTD.” (MOGA)
                     
 

                                                                                             

                                                                                                                                    

                                                             
 
 
 

                                                                                                                                    

 
 
 

NESTLE IN INDIA
            Nestle set up its operations in India, as a trading company, in 1912. It began
trading as “Nestlé Anglo-Swiss Condensed Milk Company (Export) Ltd.” for
importing &selling finished products in the Indian market.

            After Independence in 1947, the economic policies of the Indian Govt.

emphasized the need for local production. Nestlé responded to India’s aspirations by
forming a company in India & set up its first factory in 15th of November 1961 at
Moga (Panjab) to develop Moga as milk economy. The production started with the
manufacture of Milkmaid at Moga factory in 1962 & other products were gradually
brought into the fold.
             At present Nestlé has 6 manufacturing units at Choladi (Tamil Nadu),
Nanajangad (Karnataka), Samlakha (Haryana), Ponda & Bicholim (Goa) which are
successfully engaged in meeting the domestic as well as the exports demand. 

Nestlé  India is now putting up the 7th factory at Pant Nagar in Uttaranchal.

Among them Moga factory is the largest and the oldest producing the widest range of
food products. 

            The corporate office is located at Gurgaon & the registered office at M-5A,
Cannaught Circus,New Delhi. 

            Nestlé has been a partner in India's growth for over nine decades now and has
built a very special relationship of trust and commitment with the people of India. The
Company's activities provide direct & indirect employment & livelihood to about one
million people including farmers, suppliers of packaging materials, services and other
goods.

Nestlé Has Seven Factories in India

MOGA FACTORY

                         Moga factory started production in 1962. It contributes almost 75% of

Nestlé’s total production volume, manufacturing 80,000 tons of food products &
employs 1500 people. The entire range of milk, culinary products, cereals & vending
mixes is manufactured in Moga.

CHOLADI FACTORY

            The factory in Choladi started production in 1967, situated in south India, about
275 kms. from Bangalore. The factory today has 80 employees. It processes about 500
tons of instant tea, coffee which is all exported.

NANJANGUD FACTORY

            In Nanjangud factory production started in 1989 with manufacturing of Nescafe

Sunrise. Milo manufacture at Nanjangud began in 1996.It is situated 160 kms south of
Banglore, the factory has 245 employees. Coffee capacity currently is 15,000 tons and
Milo 3000 tons p.a.
SAMALKHA FACTORY

            Samalkha factory started production in 1993, it is situated 70 kms from Delhi

and it has 203 employees & manufactures about 11,000 tons of food products
comprising Cerelac, Nestum & Ethnic deserts. Pure Life, treated water & Nestlé Dahi
are also being produced here.

PONDA FACTORY

            Ponda Factory began production of Kit Kat in 1995.It currently employees 140
people. It is located 40kms from Panjim, capital city of Goa. It has been expanded into
other confectionery products comprising Jellies Pastilles, & Chocolate based
confectionery.

BICHOLIM FACTORY

            Bicholim Factory, a satellite factory of Ponda(Goa) began production in 1997.

Noodles & Cold Sauces are manufactured here.

Pant Nagar factory

                 This factory is situated in Pant Nagar of Uttranchal. Noodles & other
culinary products are manufactured here. 

India has the co –packing arrangement in:

 Nestle Polo-Bakeman’s (Nagpur)
 Chocolates-Campo (Puttur)
 Tasters Choice–Williamson Major company (silliguri)
 Toffee-Nutrine (Sunder Nagar)
 Pickles-Choride foods Ltd. (Puna)
 Cold sauce 200 gm. – Nijjer Agro Pvt.Ltd. (Amritsar)
 Dosa & Samber mix – Indian foods & fermentation Ltd. (Nagpur)

Moga Factory 
Establishment
            Moga is located in the Malwa region of Punjab State, about 400kms. North of
New Delhi. It is popularly known among the famous grain markets of the world. In
1959, Nestlé took a decision to establish milk processing factory at Moga town for
economic & social development of the area.

                 Moga factory was established in 15th Nov.1961 & the production
commenced in early 1962. Initially it was started as a small Milk Factory
manufacturing milk product “Milkmaid”. Thereafter, with passage of time there has
been a continuous & rapid expansion in the factory.

                “Nestlé India Ltd.” was formally incorporated in 1978 & prior to which
the manufacturing license was issued in the name of “Food Specialties Ltd.” After 28
Years of the company it was realized that in order to survive in the international
competition and to keep up with the changing time a better and closer relationship was
required between Nestlé International and its Indian counterpart. So in 1990 a unified
production & marketing front, under the name of “Nestlé India Ltd.” was conceived.

               Today, Moga Factory is one of the largest Nestlé Factories in the World in
terms of Area, Product range, Manpower, etc. It contributes 75-80 % of the total
production volume of Nestlé producing 80,000 tons of high quality products p.a. The
factory buildings are spread over an area of 57 acres. It employs about 1600 men &
women. It deals with over 85,000 farmers in 1025 villages for collection of milk
through Milk agencies.

                      The credit of bringing this town on the industrial map of the world goes
to “Nestlé – The World Food Company” engaged in the largest food processing
operations in the world.

SALIENT FEATURES OF MOGA

FACTORY
            Nestle India Ltd. (Moga Factory) is the oldest & largest factory among 500
Nestle Factories worldwide with a layout spread over nearly 57 acres & having three
major plants within the factory.

The factory consists of production plants as under:

1. MILK OPERATIONS
2. POWDER FILLING & PACKING
 3. CEREALS
4. INSTANT DRINKS (VENDING MIXES)
5. CULINARY

These plants are briefly described as follow:

1. MILK OPERATIONS

             This plant has many sub- plants engaged in the processing of milk & all the
related activities that take place in Moga Factory includes Fresh milk reception, Ghee
plant, De - odourisation plant, Liquid plant, Egrons

2. POWDER FILLING PLANT

                The filling & packing of milk like Everyday, Lactogens, Nestogen and
Cerelac Tin is done in this plant.

3. CEREALS

            This plant is engaged in the production of cereal-based baby foods. The

production process consists of the addition of various Enzymes, Vitamins, Minerals &
Fruit extracts as Wheat, Apple, Orange & Vegetables to the cereal base. 

4. INSTANT DRINKS

            This plant is engaged in the filling of vending pre - mixes.  

5. CULINARY

               This plant is engaged in the production of Noodles, Tastemakers, Soups,

Sauces & the like. The plant is divided into three sections:

a. NOODLES
b. SEASONING
c. COLD SAUCES

d. NOODLES

               It is one of the major plants of Nestle. Manufacturing of       Noodles is semi
automatic process consists this procedure. Tipping of wheat flour in the hoppers at the
start of the line, Mixing of dough releasing on the line, Sheet formation with the help
of rollers, Strand formation, Steaming, Frying in oil, Cooling, Wrapping cakes in
sachets along with tastemaker, Palestine of cakes. 

a. SEASONING

               The seasoning section is engaged it the production of Taste marker, Soups 
& spice for use in cold sauces. Main products are as follow:

 Maggi Taste Makers

 Sweet & Sour
 Maggi soups (Chicken, Tomato, Mushroom & Vegetable)
 Maggi Super Seasoning
 Mango Wonder-Mix
 Maggi Export Mixes.

e. COLD SAUCES

              This section is engaged in the manufacturing of a whole range of Sauces

under the brand name of “Maggi”. Main products of this line are:

 Tomato Ketchup
 Hot-N-Sweet
 Masala Chilli
 Chili Garlic 
 Italian Pizza Popping

Major Departments in Moga factory 

 Human Resources Department
 Production Department

 Purchase Department

 Accounts & Administration Department

 Personnel Department

 Quality Assurance Department

  Security Services
 Industrial Engineering Services

 Utility Services

 Warehouse

 Field Service

 Factory Industrial Performance

Department
IMPORTANT BENEFITS & FACILITIES
PROVIDED TO THE EMPLOYEES BY
NESTLE
CANTEEN

             The factory canteen provides lunch & dinner prepared under hygiene
conditions for all employees at a subsidized rate against a coupon.  In addition
tea/coffee is served free of cost during specified break timings.

UNIFORMS

            All employees are required to be in complete uniform specified. Uniform

consists of a Pant, Shirt & Cap/Turban for each department.

LAUNDRY

           The laundry is located near the main canteen. Neat, clean & ironed clothes can
be collected from laundry during specified hours.      

DISPENSARY AND HEALTH CARE

       The Company has a Dispensary with a full time Pharmacist and a visiting Doctor
to provide treatment of minor ailments & First aid in case of accidents. The health
record of employees is maintained in the medical card kept in the Dispensary
including Blood Group.    
ACCIDENTS/FIRST-AID BOXES

            All departments are equipped with First –Aid Boxes which can be used in case
of an accident or minor ailment. In case of serious accident/emergency the employee
is shifted to a near by hospital.

MEDICAL SCHEME

            The company covers the medical expenses & reimbursement of the

hospitalization expenses of all eligible employees, in case they are hospitalized,
within prescribed limits.

                

INFANT FEED SCHEME

                    Nestlé provide infant foods free of cost to the newborns of its permanent
employees only where breast-feeding is not possible. For this a doctor’s prescription,
birth certificate with a prescribed format of the newly born is required to be submitted
to the H.R.Deptt. This facility can be availed during the child’s first year of age and
the facility continues for 48 weeks after that first week in which the feed is
obtained.    

STAFF SALES

           Nestle provide a standard discount rate of 10% on the wholesale price of its
products to the employees. The Staff sale shop is located near the factory gate, stocks
all the products marketed by firm. The employees can purchase products after
obtaining the staff sale card from the H.R.Deptt.     

LOCKERS AND REST ROOMS

            Each employee is given a locker to keep his uniform & other clothes. Money or
valuables should not be kept there. Lockers are issued against codes which are
provided with Showers, lavatories & resting place for break. Separate lockers & rest
rooms are available for female employees.

LEAVES

           Three types of leave are granted to employees:

 Earned Leave
  Sick Leave
 Casual Leave      

RETIRAL BENEFITS

Retrial benefits are provided on retiring from the job on completion of 60 years of
age:

 Provident Fund And Family Pension Scheme

 Employees Deposit Link Insurance
 Gratuity
 Company Pension Scheme

CONTRIBUTION OF NESTLE TOWARDS

 

ECONOMIC & SOCIAL DEVELOPMENT

                        Nestlé India Ltd. is not only an industrial & a commercial house
but has made sustained efforts to improve economic and social environment of
the people in the area. The credit of bringing this town on the industrial map of
the world goes to Nestlé – The World Food Company.   

Environmental Responsibilities:     

                 The company is highly conscious about its Environmental Responsibilities

& uses various methods to create awareness among employees & consumers about
their responsibilities towards environment. Factory has been awarded a Certificate
from the “Punjab State Pollution Control Board” for air & water discharge. An
Environmental Committee has been constituted to study, monitor operations &
activities within the firm.    

Construction of Facilities for Drinking Water:  

            The Company is helping with construction of facilities for drinking water in

village schools of district. Drinking water project involves sinking deep bore wells,
construction of proper storage facility & imparting water education to the village
school students. So far 44 drinking water projects have been completed & benefiting
over 15000 village students.    

Assisting dairy farmers in India:

            Through assistance to farmers Nestlé  has helped to raise the quality, hygiene &
value of the milk.  It improves people's health, lifestyles and the region's economy.
Investment Milk Collection centers with proper facilities are established & farmers
are advised on good breeding, feeding practices, and on the health of dairy herds.   

Nestlé  Agricultural services:   

                       Nestlé's provide Agricultural Services to educate, advice & provide the
services to the farmer to increase the yields of crops and dairy herds.  Special camps
are organized for the awareness of farmers about new innovations to improve the
quality & hygiene of the milk produced.  

FRESH MILK COLLECTION SYSTEM & PRICING POLICY:

            Company has opened milk collection centers with facilities to test fresh milk &
preserve samples in all villages falling within its district. Fresh milk samples are
tested in the presence of farmers & preserved milk samples are tested in the lab of the
factory. Milk payment is based on the quantity of milk, fat (%) & gross amount. Milk
payment is computerized & directly made to the farmers with a slip which carries
detail of milk supplied by them.

EXTENSION EDUCATION:

            Every year seminars are organized in collaboration with Punjab Agriculture

University (PAU) Ludhiana to provide information to the farmers relating to dairy
farming, fodder production, animal health, breeding, clean milk production etc.
“Changi Kheti”– a PAU publication is also made available to the farmers free of cost.

COMMUNITY SERVICE:

            The company is also doing a lot of community service. In Sept. 1988, when
floods caused havoc in Punjab, the company & the concerned people organized
Langar (free food) at three most effected areas in region which continued for
fifteen days. Green & dry fodder supplied to the farmers. About 600 animals
were vaccinated; medicines and veterinary services were provided to 2000
affected animals.

 
 
 
 

Cadbury’s profile
        Cadbury is one of the well known names in world of MNC’S. It is market
leader of chocolate confectionery market with a 70% share. Cadbury story shows
how a small family business developed into an international company, combining the
most sophisticated technology with highest standards of quality, technical skills &
innovation established by founders.

            In 1824, a young Quaker, “John Cadbury” opened the one-man business
selling cocoa & chocolate, in Bull Street, Birmingham, which was to be the
foundation of Cadbury Limited, one of the world's largest producers of chocolate. His
lifelong involvement provide tea, coffee, cocoa & chocolate as an alternative to
alcohol, which was believed to be one of the causes of poverty & deprivation amongst
working people.

            Synonymous with word chocolate, “Cadbury” has a unique relationship with

consumer. This relationship is underpinned by the powerful visual icons of the
Cadbury brands - the Cadbury signature, purple colour, the 'glass and a half'
trademark, & the chocolate itself. These all come together to form the brand identity -
the Cadbury Master Brand Cadbury is the single largest brand in chocolate on
international basis.

            In 1969 the two great household named Schweppes & Cadbury merged to form
“Cadbury Schweppes plc”. Since then business have been expanded throughout the
world by a programme of organic and acquisition led growth.

            Products of unique brands are producing & selling which give or bring pleasure
to millions of consumers around the world every day which is done successfully for
over 200 years.  This success has been built upon understanding the needs of our
consumers, customers and other

              In 1831 John Cadbury became a manufacturer of drinking chocolate and

cocoa, the real foundation of the Cadbury manufacturing business. After that company
receive their first Royal Warrant as 'Manufacturers of cocoa and chocolate to
Queen Victoria'. Today Cadbury continues to hold Royal Warrants of
appointment.           

Milestones of Cadbury
1824 John Cadbury, founder of Cadbury, opens his shop in Bull Street of
Birmingham selling tea, coffee, cocoa & drinking chocolate, which he
prepares himself using a mortar and pestle.
1831 A small factory is rented in Birmingham & John Cadbury becomes a
manufacturer of drinking chocolate and cocoa.
1842  John Cadbury is selling 16 sorts of drinking chocolate and eleven cocoas.
The earliest preserved price list shows drinking chocolate in cakes and
powder.
1847 John Cadbury takes his brother Benjamin into partnership and the family
business becomes Cadbury Brothers of Birmingham. A larger factory in
Bridge Street, the centre of Birmingham is rented.
Mid Under Prime Minister William Gladstone the British government reduces
1850s  tax on imported cocoa beans, bringing cocoa and chocolate within the
reach of more people.
1854 The Cadbury Brothers receive their first Royal Warrant as
'manufacturers of cocoa and chocolate to Queen Victoria'. Today
Cadbury continues to hold Royal Warrants of appointment.
1866 The Cadbury brothers introduce a new process to produce a much more
palatable cocoa essence - the forerunner of the cocoa we know today. The
plentiful supply of cocoa butter remaining after the cocoa is pressed makes it
possible to produce a wider variety of eating chocolate.
1897 Cadbury manufactures its first milk chocolate.
1905 Cadbury's Dairy Milk is introduced with a new recipe using fresh milk.
1915 Cadbury's Milk Tray is introduced.
1920 Cadbury's Flake is introduced.
mid- Cadbury's Dairy Milk gains its status as brand leader in the UK, a
1920's position that it has enjoyed ever since.
1930 Cadbury opens a factory in New Zealand.
1932 Cadbury opens factories in Canada & Ireland which compliments
the manufacturing strength with other factories around the world.
1938 Cadbury's Roses are launched.
1939 Cadbury opens a factory in South Africa.
1940's During the war years, cocoa & chocolate products are regarded as essential
foods for the forces & civilian population. Rationing continues until 1949.
1947 Cadbury opens a factory in India.
1960's Cadbury introduces the latest technologies and installs specialist plants for
milk processing and cocoa bean processing in the UK.
1969  Cadbury Group Ltd merges with Schweppes Ltd to create Cadbury
Schweppes plc.

Major Brands
Cadbury, Schweppes, Halls, Trident, Dr Pepper, Pepsi, Red Bull, 7 UP, Mountain
Dew, Gatorade Snapple, Trebor, Dentyne, Bubblicious & Bassett - are enjoyed in
almost every country around the world.

CADBURY IN INDIA
            In 1947 Cadbury opens a factory in India as “Cadbury India” (formerly
Hindustan Cocoa Products) which is a subsidiary of Cadbury Schweppes Overseas,
UK.

         The company has expanded the installed capacity of Malted Foods by 700
Tonnes & with this expansion, total capacity has risen to 8600 Tonnes. Company is
committed to ethical business practices, fair dealing, honesty & full compliance with
laws affecting businesses. In 2004 it was the winner of Britain's most admired
company award as voted by other leading businesses.

            Company has organized into four regions & six global functions. Each region
is focused on commercial operations in its geographical & product area, it also
maintains teams from each of the six functions.

THE REGION’s ARE:

 Americas Beverages;
 Americas Confectionery;
 Europe, Middle East and Africa (EMEA);
 Asia Pacific.        

         Australia & New Zealand are largest markets in the region having leading
position in Australian confectionery market, with a 55% market share & in New
Zealand with a 43% share. Australia is 11th largest confectionery market in the world.
Overall Indian business has a leading presence in chocolate with a 71% market share,
and also sells sugar confectionery.

 Cadbury opens factories in New Zealand, Canada, South Africa & Ireland which
compliments the manufacturing strength with other factories around the world in
Malaysia, Africa, Jamaica, France, Spain, South America, Germany, Australia, India,
Japan, Thailand, China & Singapore.

Factories & Regional Offices in India

Cadbury has four factories & seven Regional offices in India as follow:

Plant Locations:
 Thane (Maharashtra),
 Induri (Maharashtra),
 Baddi (H.P.)
 Malanpur (M.P).

          
Out of which Induri Farm is a wholly-owned subsidiary of the company
which exports malted foods & chocolates to the Gulf & Asian countries. Cadbury
employ around 50,000 people.

Regional Offices:
Cadbury  has seven ragional offices in following cities:

 Delhi
 Kolkatta
 Mumbai
 Kerala
 Chennai
 Banglore
 Cochin

            The company has received permission from the RBI for payment of royalty of
1% on domestic and exports sales for use of Trade Marks to Cadbury Schweppes
Overseas, UK.

Key products of Cadbury

 Dairy Milk (largest selling chocolate in the country)
 5 Star
 Gems
 Dairy milk Choclate
  Coated wafer biscuits
 Malted food
 Sugar confectionery
 Cadbury Roses.
 Cadbury Fruits
 Cadbury desserts.
 Perk
 Eclairs.
 Dollops (1989)
 Drinking chocolate
 Malted foods
 Cocoa powder
                                           Today, Cadbury is the clear leader in U.K
chocolate confectionery market with over 50 brands & 350 packaging variations to
meet every need & occasion. Currently Mr. C.Y.Puri is chairman of the company.

            Building on our existing strong reputation with our employees and society, to
focus on creating a cohesive and talented workforce. The Company will continue to
work to our high standards of corporate and social responsibility both in the way the
company conducts their business, and in our products and the way Cadbury sell them.

                           In 2005-06 company is trying to concentrate on improving the

business planning in areas Sales & Operations, Planning & Logistics, Customer
Operations. In achieving this goal company will require further changes to the supply
chain & IT capabilities. Each function has a central team based at Group Headquarters
& regional presences which are coordinated by the central team. This enables to focus
on top-line growth & allows the functions to develop global strategies & processes
towards best in class performance.

OBJECTIVE OF ANALYSIS OF
FINANCIAL STATEMENTS
Analysis of financial statements is systematic process of the critical examination of
financial information contained in the financial statements in order to determine
financial strengths & weaknesses of the firm. As a doctor examines his patient by
recording his body temperature, b.p.etc. before making conclusion regarding illness &
before giving treatment. Similarly, objective of such analysis is to diagnose the
information contained in financial statements (B/S, income statement, ratios, stock
prices to judge the profitability & financial soundness of the firm with various tools of
analysis  before commenting to understand the working & following informations:

 Profitability
 Liquidity
 Productivity of assets
 Goodwill
 Cash management
 Solvency of  the firm
 Financial soundness
 Strengths & weaknesses of the firm.
 To study relationship between different statements.

            Thus analysis of financial statements means such a treatment of information

contained in the financial statement so as to afford a full diagnosis of the profitability
and financial position of the firm concerned. 
 

Methods of Financial Analysis 

            Various methods are used for analysis of financial statements and result of
operations as well. It helps in predicting about the firm’s position.  The following are
main methods used for financial analysis of financial statements: 

o RATIO ANALYSIS
o TREND ANALYSIS
o FUND FLOW ANALYSIS
o CASH FLOW ANALYSIS
o COMPARATIVE STATEMENTS
o COST-VOLUME-PROFIT ANALYSIS
o COMMON – SIZE STATEMENTS.

  RATIO ANALYSIS
              A ratio is a simple arithmetical expression of the relationship of one
number to another. It is one of the most powerful techniques of financial
analysis. In finance, ratio is used as a bench mark for evaluating the financial
position & performance of the concern. It expresses quantitative relationship
between figures & group of figures. It is the process of establishing &
interpreting various ratios for helping in making certain decision. With help of
ratios financial statements can be analyzed more clearly & decisions can be made
from such analysis. It is not an end in itself but a means of better understanding
of financial strengths & weaknesses of the firm. There are a number of Ratios
which can be calculated from information given in financial statements. It may
be defined as relation of one amount(a) to another(b) which can be expressed as
ratio of   a to b, a : b (a is to b), or as a simple fraction, integer, decimal, fraction
or percentage(%)

      According to accountant’s handbook by Wixon Kell & Bedford “A ratio is an

expression of the quantitative relationship between two numbers”.

Nature of Ratio Analysis

      Ratio Analysis is a technique of analysis and interpretation of financial statements.
It is a means of better understanding financial strengths and weaknesses of a firm are
company. The financial statements of business enterprises bring out the absolute
figures which will be too lengthy to remember and come to meaningful conclusions.
The institutions conduct an inter-firm comparison at the time of appraisal and also a
comparison of past with present. The ratios bring absolute figures closer to judgment
as certain benchmarks in ratio’s based on experience are set as standards. The absolute
figures as such may not indicate any thing. The ratios provide information about
financial position of a concern. These are pointers or indicators of financial strength,
soundness, position or weakness of an enterprise.

Steps Involved In Ratio Analysis:

 Selection: Selection of relevant data from the financial statement depending
upon the objective of the analysis.
 Calculation: Calculation of appropriate ratios from the data.
 Comparison: Comparison of the calculated ratios with the ratios of the same
firm in the past/ratios of some other firms or with ratios of the industry to
which the firm belong.
  Interpretation: Interpretation of ratio is most important factor without which
collected data does not convey any sense. Interpretation needs skill,
intelligence & foresightedness.

  Use & Significances of Ratio Analysis:

Managerial uses of Ratio Analysis:

It is helpful for managers in Financial forecasting-planning, decision

making,Communicating,Controlling Co-ordination, Analysis & interpretation.

Utility to Shareholders:

Investors want to know about financial position of firm before investing for security
of his investment & return in form of dividend /interest.

Utility to Creditors:

            Creditors/Suppliers extend short-term loan to the concern so financial position

of firm warrants their payments at time.

Utility to Employees:

            Profitability of firm enables employees to put forward their viewpoint for

increase of wages & other benefit.

Utility to Government:

            Govt. may base its future policies on basis of information of units in private
sector & to submit audit report for tax purposes.

Limitations of Ratio Analysis

1. Lack of Adequate Standards:

                           There are no well accepted standards or rules of thumb for all ratios
to be accepted. It makes interpretation of ratios difficult.

2. Inherent limitations of Accounting:

                  Like financial statements, ratios also suffer from inherent weakness of
accounting records such as their historical nature. Ratios of past are necessarily not
true indicators of future.

3. Window dressing:

                      Financial statements can easily be window dressed to present a better

picture of its financial and profitability position to outsiders. Hence one has to be very
careful in making a decision from the ratios calculated from such financial statements.

4. Personal Bias: 

            Ratios are only means of financial analysis and not an end in itself. Rations
have to interpret and different people may interpret the same ratio in different ways.

5. Historical Analysis: -

         Financial statement analysis is historical analysis. It analysis what had happened
till date .It does not reflect the future. Persons like shareholders, investors etc. are
more interested in knowing the likely position in future. 
 
 

Functional Classification of Ratios 

1. Current Ratio 1. Debt Equity 1. Inventory (A) In relation to Sales

2. Liquid Ratio Ratio Turnover Ratio :
3. Absolute 2. Debt to Total 2. Debtor’s
Liquid Ratio Capital Ratio Turnover Ratio 1. Gross profit
3. Cash Flow 3. Fixed Asset ratio
4. Capital Turnover Ratio 2. Net profit ratio
Gearing 4. Total Asset 3. Operating ratio
Turnover Ratio 4. Operating profit
5. Working Capital ratio
Turnover Ratio 5. Expense ratio
6. Payable Turnover
 Ratio
7. Capital Employed (B) In relation to
8. Turnover Ratio
Investment:

1. Return on
investment
2. Return on
capital
3. Return on
equity capital
4. Earning per
share
5. Price-Earning
ratio

LIQUIDITY RATIOS
       Liquidity ratio measures the ability of firm to meet its current obligations as and
when they become due & firm ensures that it does not suffer from lack of liquidity or
excess of liquidity. Lack of sufficient liquidity will result in poor credit worthiness,
legal tangles, loss of creditor’s confidence or even resulting in closure of the
company. High liquidity is also bad, Idle assets earn nothing. Therefore it is necessary
to strike a proper balance between high liquidity & lack of liquidity. Liquidity Ratios
are:

             

o CURRENT RATIO
o LIQUID RATIO
o ABSOLUTE LIQUID RATIO
o INTERNAL MEASURE

 
CURRENT RATIO
Current ratio is measure of firm’s short-term solvency. It is a measure of general
liquidity & widely used for analysis of financial position of a firm. It defines the
relationship between current assets & current liability.

      Current Ratio  = Current Assets

                                                   Current Liabilities

YEAR 2001 2002 2003 2004 2005

COMPANY
Nestle 0.74 0.84 0.92 0.60 0.68
Cadbury 1.76 1.83 1.73 1.24 0.91
 
Analysis (Nestle India Ltd v/s Cadbury)

Generally, Current ratio of 2:1 is considered satisfactory. A firm should ensure that it
does not suffer from lack of liquidity. Above table & graphical representation of
Nestle & Cadbury is showing that ratios of both the companies have a declining
trend. No one of the ratios is nearer to the rule, but financial position of Cadbury is
still better than Nestle. So, Nestle should try to improve its current financial position. 

Quick Ratio 
This ratio establishes a relationship between quick/liquid assets and current
liabilities. An asset is liquid if it can be converted into cash immediately or reasonably
soon.

 Quick/Liquid/Acid Test Ratio = Current assets – Inventories

      
YEAR 2001 2002 2003 2004 2005

COMPANY
Nestle 0.26 0.29 0.32 0.23 0.31
Cadbury 1.26 0.75 1.00 0.49 0.40
       Current liabilities
Analysis (Nestle India Ltd v/s Cadbury

As rule of thumb or as a convention a quick ratio of 1:1 is considered to represent

satisfactory current financial conditions. Less than 1:1 ratio shows that inventories are
higher. Inventories are considered to be less liquid.                      From the data &
graph we analyze that the quick ratio of Nestle is not satisfactory as compared to
Cadbury. It shows that Nestle has high inventory, which is less liquid. So, company
has to depend on sales in order to meet its immediate obligations.

Absolute liquid ratio 

Absolute liquid ratio includes cash in hand & cash at bank &marketable securities
or temporary investments. The ratio of 1:2 is acceptable.

      Absolute liquid ratio   =   Absolute liquid assets

YEAR 2001 2002 2003 2004 2005

COMPANY
Nestle 0.011 0.014 0.024 0.015 0.053
Cadbury 0.27 0.43 0.26 0.06 0.08
                                                 Current liabilities

Analysis (Nestle India Ltd v/s Cadbury

            Generally absolute liquid ratio of 1:2 is considered to represent satisfactory

current financial conditions.Re.1 worth absolute liquid assets are considered adequate
to pay Rs.2 worth C. Liabilities in time. As shown in above data & graph we can
analyze that absolute liquid ratio of Nestle & Cadbury is not satisfactory according to
rule. It shows that Cadbury is in better position than Nestle. So, company should
try to improve its liquidity position to meet its immediate obligations.

SOLVENCY RATIOS
            “Solvency” refers to ability of concern to meet its long term obligation. Long-
terms creditors (debentures holders, financial institutions etc.) are interested to know
about ability of firm to pay regularly interest on borrowings & repayment of principal
amount. Ratios are calculated to know about financial risk and ability of the firm
using debts to shareholder’s advantage. Solvency ratios are as follow: 
  SOLVENCY RATIO
 PROPRIETORY RATIO
 DEBT EQUITY RATIO
 

Solvency Ratio
This ratio indicates the relationship between total liabilities to the outsiders
            
& total assets of the firm. Lower the ratio, more satisfactory or stable is the long-term
solvency position of a firm.   

Solvency Ratio: = Total Liabilities to outsiders

                              Total Assets

YEAR 2001 2002 2003 2004 2005

COMPANY
Nestle 66.7 63.2 65.7 66.2 66.4
Cadbury 52 71 52.73 49.48 46.86

Analysis (Nestle India Ltd v/s Cadbury) 

Ratios indicate relationship between total liabilities & total assets of a firm. Normally
lower the ratio, more satisfactory or stable is the long-term solvency position of a firm
& according to this rule; ratios of Cadbury are lower than Nestle which shows that
solvency position of Cadbury is more satisfactory. Nestle should try to improve its
Long-term solvency or to decrease its liabilities.

Proprietory Ratio
This ratio establishes the relationship between shareholders funds to total
assets of firm.

      Proprietory Ratio  =   Shareholder’s funds

                                          Total assets

YEAR 2001 2002 2003 2004 2005

COMPANY
Nestle 33.3 36.8 34.3 33.8 33.6
Cadbury 48 29 47.27 50.52 53.14
Analysis (Nestle India Ltd v/s Cadbury)

          This Ratio is very important for determining long term solvency of a firm.
Higher the ratio or the share of the shareholders in the total capital of the company,
better will be the long term solvency of a firm. This ratio represents the relationship of
owners fund to total assets. From Data & Table defined above ratios of Cadbury is
higher than Nestle which shows that solvency position of Cadbury is better than
Nestle. So, Nestle should try to improve its Long-term solvency.

DEBT EQUITY RATIO 

Debt equity ratio also known as External-Internal Equity Ratio is calculated
            
to derive an Idea of claims of outsiders & Owners. The ratio is sufficient to assess the
soundness of long term financial position.

   Debt equity ratio  =       External Equities               

                                     Internal Equities 

YEAR 2001 2002 2003 2004 2005

COMPANY
Nestle 2 1.72 1.92 1.96 1.97
Cadbury 0.6 0.4 0.3 0.4 0.5
 

Analysis (Nestle India Ltd v/s Cadbury) 

Debt equity ratio indicates the proportion between shareholders fund & the long terms
borrowed funds. Higher ratio indicates risky financial position while lower ratio
indicates safer financial position. Ratio of 1:1 is considered as satisfactory. Ratio in
above data & graph indicates that ratio of Nestle is high than Cadbury. Higher ratio of
Nestle represents risky financial position while lower ratio of Cadbury indicates safer
financial position. Nestle should try to improve its soundness of long term financial
position.

Activity Ratios
            This ratio is used to evaluate the efficiency of a firm to manage & utilise its
assets. Funds of creditors & owners are invested in various assets to generate sales &
profits. Better the Mgt. of assets, larger is the amount of sales & profit. Activity ratios
involve a relationship between sales and assets.

 INVENTORY TURNOVER
 INVENTORY CONVERSION PERIOD 
 DEBTORS TURNOVER
 AVERAGE COLLECTION PERIOD RATIO
 

Inventory turnover ratio

            Inventory turnover ratio indicates the efficiency of the firm to manage its
Inventory. Every firm has to maintain sufficient level of Inventory to meet the
requirements of business. It shows how rapidly the inventory is turning into
receivable through sales.

      Inventory turnover ratio   =          Sales

                                                    Inventory

YEAR 2001 2002 2003 2004 2005

COMPANY
Nestle 10.39 9.3 8.9 9.65 10.2
Cadbury 10.06 11.66 10.27 9.17 10.03
Analysis (Nestle India Ltd v/s Cadbury)

Inventory turnover ratio indicates the efficiency of the firm in producing and selling
its product. High inventory turnover indicates efficient management of inventory &
vice versa. Above data & table is showing that inventory turnover ratio is increasing.
It shows the sales of the company are increasing. But there is close competition
between the both firms. Average position of Cadbury is better than Nestle which is
now at improving stage & doing well.

Inventory conversion period 

      It represents average no. of days for which a firm has to wait before      
receivables are converted into cash. 

      Inventory conversion period   =  Days in a year

                                                     Inventory turnover ratio

YEAR 2001 2002 2003 2004 2005

COMPANY
Nestle 35 39 41 38 36
Cadbury 36 31 36 40 36
 

Analysis (Nestle India Ltd v/s Cadbury)

            There is no rule of thumb or convention for interpreting the inventory

conversion period. Normally low period indicates less investment in inventory or
quick movement of inventory. Longer the period, larger will be the chances of bad
debts.

            As shown in above data & table inventory conversion period of both the firms
is decreasing. It shows equal inventory conversion period in 2005. But overall
performance of Cadbury is better than Nestle. Nestle is now at improving stage &
doing well because of its efficient management.

Debtors turnover ratio

         Debtors turnover ratio indicates the number of times the debtors are turned
over during a year. Generally, higher the value of Debtors turnover the more efficient
is the Mgt. of debtors/sales & vice versa as credit is most important element for sales
promotion. 

      Debtors turnover ratio  =  Net Credit Annual Sales

YEAR 2001 2002 2003 2004 2005

COMPANY
Nestle 33 61 73 82 84
Cadbury 31.71 32.86 32.91 36.35 57.06

                                                Average Trade Debtors

Analysis (Nestle India Ltd v/s Cadbury)

Above table & graph indicates that Debtors turnover ratio of Nestle is higher than
Cadbury. Both the firms represent increasing trend in ratios, which shows efficiency
of Management of debtors/sales. But both the firms should keep in mind &
precautions should be used because, higher the ratio more are the chances of bad
debts. Otherwise shows satisfactory position. 

Average collection period ratio

            It represents the average no. of days for which a firm has to wait before its
receivables are converted into cash.

      

      Average collection period ratio  =   No.of working days

                                                               Debtors turnover ratio 

YEAR 2001 2002 2003 2004 2005

COMPANY
Nestle 11 6 5 4 4
Cadbury 11 11 11 10 6

Analysis (Nestle India Ltd v/s Cadbury) 

            It measures quality of debtors. Generally, shorter the period, better is the
quality of debtors as collection period implies quick payment by debtors. Moreover,
longer the period larger are chances of bad debts.
            Above data & table indicates that the average collection period of Nestle is
very short as compared to Cadbury which is now at improving stage as longer period
indicates larger chances of  bad debts. Now both the companies are trying to improve
their position.

Profitability ratios 
                        Profit is engine that drives the business enterprise. Primary objective of
a company is to earn sufficient profits to survive & grow over long period of time &
to contribute towards the social welfare of the society. The profitability ratios are
calculated to measure the operating efficiency of the company.

Profitability ratios are :-

 GROSS PROFIT MARGIN

 NET PROFIT MARGIN
 DIVIDEND/ PAYOUT RATIO
 EARNING PER SHARE
 DIVIDEND PER SHARE 
 
 
 
 
 
 
 

Gross profit Ratio

The G/P ratio reflects the efficiency with which management produces its products.
Higher the G/P ratio better will be the results & vice versa.

      

      Gross profit Margin Ratio  = Sales –COGS

                Sales

YEAR 2001 2002 2003 2004 2005

COMPANY
Nestle 20.6 20.6 16.2 20.2 21
Cadbury 42.04 38.32 47.25 45.27 47.26
 

Analysis (Nestle India Ltd v/s Cadbury)

The higher the G.P. ratio, the better is the company’s financial position. Gross profit is
a reliable guide to the adequacy of selling prices and efficiency of trading activities. It
is seen from the data that G.P ratio of Cadbury is high as compared to Nestle. It
maintains a cost G.P. ratio, which is a good sign. Moreover there is an increasing
trend, which shows that GOGS has decreased & there are less wastage of resources. It
is advised that Nestle should try to do its best to improve the G.P ratio.

Net Profit Ratio

Net profit ratio establishes a relationship between N.P. & sales. It indicates
            
management’s efficiency in manufacturing, administrative & other activities of the
firm. This ratio is the overall measure of the firm’s profitability.

      Net profit ratio =  Profit After Tax

        Net Sales

YEAR 2001 2002 2003 2004 2005

COMPANY
Nestle 12.2 10.7 9.5 11.3 12.5
Cadbury 9.16 5.08 5.52 5.22 4.57
Analysis (Nestle India Ltd v/s Cadbury)

            Objective of Net Profit ratio is to determine overall efficiency of the business.

Higher the Net profit ratio better is the profitability of business. Nestle shows an
increasing trend as compared to Cadbury in N.P. Ratio which is a positive sign, & it
indicates that the company is operationally efficient. 

Dividend Pay out ratio

 The dividend pay out ratio is calculated to find the extent to which EPS
            
have been retained in the business. It is important because ploughing back of profits
enables a company to grow & pay more dividends in future.

Dividend Pay out ratio = Dividend Per Share

                                                    Earning Per Share

YEAR 2001 2002 2003 2004 2005

COMPANY
Nestle 0.73 0.83 0.77 0.95 0.78
Cadbury 0.53 0.54 0.57 0.56 0.57
 
 
 

Analysis (Nestle India Ltd v/s Cadbury)

      Dividend pay out ratio means how much out of earning per share have dividend
per share been paid out. In other words pay out ratio helps in assessing the amount of
earnings, which is not distributed to shareholders retained in the business. The data
shows a decreasing trend in dividend pay out ratio of Nestle as compared to Cadbury.
i.e. the company is retaining the amount in cash.

Earning per Share

EPS is a good measure of profitability of the firm on a per share basis. It does not
reflect how much is paid as dividend & how much is retained in the business. But as a
profitability index it is a Valuable and widely used ratio.

      EPS  = Net Profit After Tax - Preference Dividends

                          Number of Equity shares

YEAR 2001 2002 2003 2004 2005

COMPANY
Nestle 27.3 21.5 24.72 22.88 28.60
 Cadbury 11.78 12.49 12.53 12.66 12.59
 

Analysis (Nestle India Ltd v/s Cadbury)

      This ratio is calculated to judge the overall profitability of the enterprise. This ratio
helps in evaluating the prevailing market price of share.

      The trend from the chart shows that Nestle has an increasing profitability as
compared to Cadbury. This ratio shows strong position of the company in the market.

DIVIDEND PER SHARE RATIO

Shareholders are the real owners of a company & they are interested in the
earnings distributed & paid to them as dividend. DPS is calculated to evaluate the
relationship between per share paid & market value of the share.

      DPS = Dividend paid to shareholders

          No of shares outstanding

YEAR 2001 2002 2003 2004 2005

COMPANY
Nestle 20 18 14 27 29
Cadbury 20 19 20 20 20
 

Analysis (Nestle India Ltd v/s Cadbury)

      DPS ratio is calculated to evaluate the relationship between per share paid &
market value of the share. Higher the D.P.S, higher is the confidence of shareholders
in the company provided, there is an increase in EPS.We see that D.P.Share ratio of
Nestle is showing an increasing trend.  So, there is an increase in D.P.Share ratio
also.Shareholders will be very much attracted towards this company & will have
confidence in this company. 
 
SWOT ANALYSIS OF NESTLE v/s
CADBURY
 STRENGTHS: -   
Strengths are internal competencies of a firm, particularly in comparison with its
competitors. Strengths may encompass the company image, brand image, business
strategies, & functional areas such as marketing, finance, personnel, production &
R&D.    

 Nestlé & Cadbury are world famous food companies producing Quality
products.
 Access to the Groups of both firms proprietary technology/brands, expertise,
the extensive centralized R&D facilities, under the general license agreement.
 High quality & safe products, endorsed by companies’ seal of guarantee at
affordable prices.
 Company is highly conscious about “Environmental Responsibilities”.
 Strong and well differentiated brands with leading market shares.
 Provide its shareholders with rapid growth & a fair return.
 Provide its employees challenging & satisfying work environment.
 Rules & Regulations set out by the firm is strictly followed by all.
 Contribute positively to the society in which we operate.
 All the products are produced, tested, & packed hygienically.
 Both firms have power to compete with competitors in better way.
 Brand names are associated with ‘quality products’ in worldwide consumer
markets.
 Ongoing product innovation to convert consumer insights.
 Well-distributed product portfolio.
 Integrated and efficiency supply chain.
 Distribution structure allows wide reach & coverage in target markets.
 Capable and committed manpower resources.
 WEAKNESSES: -   
Weaknesses are those factors which tend to decrease the competencies of firm
particularly in comparison with its competitors. Such weaknesses may include poor
product quality, poor financial position, lack of R&D back up, obsolete technology,
poor distribution system, poor management etc.
  Distribution of products from one place to another is costly process
 Complex supply chain configuration.
 Exports of coffee to Russia constitute a substantial part of overall exports.
 Market price of some products are high as compared to other competitors
available in market.    
 OPPORTUNITIES: -
 Potential for expansion in the smaller towns & other geographies.
 Existing markets not fully tapped Potential for growth through increased
penetration.
 Growing trend for “out of home” consumption.  
 Leverage Technology to develop more products that provide nutrition, health
and wellness.
 THREATS: -     
 Trend of increased consumer spends on consumer durables resulting in lower
spending for FMCG products.
 Lower profitabity & mkt. price of shares can affect Goodwill of firms.
 Rising prices of raw materials and fuels.
 Change in fiscal benefits

BEST PERFORMING FIRM FROM

SHAREHOLDER’S
POINT OF VIEW
            It is difficult to predict the best performing company by considering just one
parameter (performance graphs) as different firms have different perspectives.  So we
need to consider few of the following gauges:

1. Sales/Turnover
2. Net Profit Margin(NPM)
3. Debt-Equity ratio
4. Solvency Ratio
5. DPS(Dividend per share)
6. EPS(Earning per share)

Analysis (Nestle India Ltd v/s Cadbury)

  SALES: - Sales of Cadbury shows increasing trend than NESTLE. Increase in
sales shows that people has more trust in the company.
 NET PROFIT MARGIN: - NESTLE shows an increasing trend in NPM as
compared to Cadbury which shows less NPM in 2005 as compared to 2004.
So, profitability of NESTLE is better.
 DEBT-EQUITY RATIO: -Capital structure comprises of how much debt and
equity are used for the company. Cadbury shows better & safer financial
position of the company than Nestle.
 SOLVENCY RATIO: - As seen from the chart attached Cadbury has more
solvent financial position than Nestle.
 E.P.S.: - EPS of NESTLE shows increasing trend than Cadbury. So, NESTLE
has strong position in this regard.
 D.P.S.: NESTLE shows increase in DPS which shows strong market position
than Cadbury.

REASONS FOR BEST PERFORMANCE

MANPOWER DEVELOPMENT: The Company has consistently emphasized the
need for improved white-collar productivity. During 2005 as well all Training,
Development & manpower policies were aligned to this objective. In parallel, the
Company remained committed to providing international and diverse professional to
explore the employment. 

TRADE RELATIONS: The Companies continued to receive co-operation & support

from distributors, retailers, suppliers & others associated with Companies as trading
partners. The Directors wish to develop strong links with them based on mutuality,
respect, trust & co-operation.

APPRECIATION: Companies have been able to operate efficiently due to culture of

integrity& professionalism. Improvement in all functions& areas ensure efficient
utilization of Company's resources for sustainable& profitable growth.

CAUTIONARY STATEMENT: Corporate Governance Report, describing the

Company's objectives, projections, estimates and expectations may constitute
"forward looking statements" within the meaning of applicable laws & regulations. 

DIRECTORS’RESPONSIBILITY: According to Section 217(2AA) of Companies

Act, 1956, the Directors confirm that in preparation of annual accounts, applicable
accounting standards have been followed to give a true & fair view of state of
affairs& of profits for that period at the end of the financial year for safeguarding
assets& for preventing & detecting fraud.
EXPORTS: Export sales have increased positively influenced by the increase in per
unit realization in exports due to higher green coffee prices, though partially offset by
the shift towards bulk packs.

SUPPLY CHAIN: In the area of supply chain management, the Company continued
to build on the base established in previous years. It continued to explore ways to
improve efficiencies in supply chain & conducted some experimental pilot projects.

The Directors wish hereby to place on record their appreciation of the efficient and
loyal services rendered by all staff and work force of the Company, without whose
wholehearted efforts, the overall very satisfactory performance would not have been
possible.

RESEARCH
METHODOLOGY
            Every project requires genuine research. Research in common parlance refers
to “search for knowledge”. Success of any project and getting genuine results from
that depends upon the research method used by the researcher.

  “According to Redman & Moore,” Research is a

systematized effort to gain knowledge,”
The main objectives of Research are:

 To bridge the gap between practical aspects & theoretical knowledge.

 For better understanding of financial strengths & weaknesses of the firm.
 To understand the working & financial position of a business.
 To study relationship between different statements from point of view of
shareholders.
 To know about production procedure adopted by the firm.
 To know about contribution of Nestlé towards economic &                   social
development
 To know about key focus areas growth and profits
 To know the Goodwill/Profitability/Liquidity & Solvency of firm.
 To know about Productivity of assets.
  To gain familiarity about the contribution of companies towards the
development of society.
 To know about the facilities provided by companies to its employees.
 To gain familiarity with a phenomenon or to achieve new insights into it.

RESEARCH METHODOLOGY FOR THE

REPORT
            Project work used with personal interview. In unstructured personal interview,
question were not arranged but kept in mind and asked from respondent to get detailed
information. Some questions are open-ended and respondent are set free to give
information.

            The questions were asked such as methods used in preparing financial

statements, record keeping, contribution towards environment & society, facilities to
employees, history, production policies, production procedure, pricing of different
products, modifications, and what people think about different products. 

NAME OF DESCRIPTION
STUDY
Data used Primary & secondary data.
Source of primary H.R. Department, Finance Department, Retailers,
data Consumers, Unstructured Questionnaire.
Source of Newspaper, Books, Magazines, Annual Report, Internet.
secondary data
Time Duration 45 Days.
Instruments used Personal interview with unstructured questionnaire.
Sample procedure Convenience sampling.
Type of Unstructured questionnaire.
questionnaire
Region Moga (Panjab).
 

LIMITATIONS & PROBLEMS

  Predicting the best performing firm by analyzing & considering just     one
parameter (Data & graphs) is very difficult as different firms have different
perspectives. 
 Ratios may be affected by window dressing means manipulation of accounts to
conceal vital facts & to show better position of firm. So, ratio may not be
definite indicator of good or bad management
 Sometimes people don’t give appropriate information.
 Financial statement analysis does not reflect the future. 
 Financial statements are confined to monetary matters alone & quality aspect
like quality of mgt., labour force etc. are ignored.
 In many situations the financial statements are not free from bias.
 Mostly some people act rudely & don’t want to give information.
 Large number of questions were not responded due to busy schedule of
company & for secret purposes.
 Generally people don’t respond well for questions like suggestion

FINDINGS

 As for as awareness is concerned it is fine for all the main products of both the
companies.
 Both the Companies have cut-throat competition.
 Liquidity & Solvency position of Cadbury is better than Nestle.
 Profitability ratio indicates that both the firms have strong market. 
 “Maggi” of “Nestle” & “Cadbury Dairy Milk” of “Cadbury” are most popular
brands.
 Both the companies are MNC’s & engaged in food processing units.
 Chocolates of Nestle are not as popular as chocolates of Cadbury.
 As for as health drink mils is concerned people’s favourite is Bournvita because
of its taste and chocolate flavour.
 Mostly people consume health drink in the morning.

 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 

Balance Sheet of “Nestlé Ltd.”

As Per Year ended 31st Dec. 2003, 2004 & 2005 (in Millions) 

 Particulars 2003 2004 2005

SOURES OF FUNDS:      
Capital 964.2 964.2 964.2
Reserves & surplus 2385.8 2229.9 2577.2
LOAN FUNDS      
Secured 51.0 79.0 143.0
Unsecured 0.00 0.00 0.00
       
TOTAL 3401.0 3273.1 3684.4
       
APPLICATION OF FUNDS:      
FIXED ASSETS      
Gross Block 7894.5 8381.6 9494.4
Less: Depreciation 3980.8 4409.5 4756.7
Net Block 3913.7 3972.1 4737.7
Capital W.I.P. 139.4 340.9 228.2
       
INVESTMENT 736.4 1548.6 1044.3
       
CURRENT ASSETS:      
Inventories 2194.2 2166.7 2531.0
Sundry Debtors 317.0 261.7 1068.0
Cash & bank Balance 62.9 94.5 366.5
Loans & advances 1549.8 1689.1 1943.3
       
Less: Current     Liabilities & Provisions      
Current Liabilities+ 2978.8 3311.8 3816.8
Provisions 2533.6 3488.7 3655.0
Net Current Assets (-) 1388.5 2588.5 2325.8
Miscellaneous Expenses not w/o+ 00.00 00.00 0.00
       
Total Assets 3401.0 3273.1 3684.4
Contingent Liabilities+ 0.00 0.00 0.00

Profit & Loss Account of “Nestlé Ltd.” 

As Per Year ended 31st Dec. 2003, 2004 & 2005 (In Millions.) 

Particulars 2003 2004 2005

INCOMES:      
Sales Turnover 22798.2 23728.2 26438.9
Other Income 278.3 144.5 263.8
Stock Adjustments (-)78.7 65.5 140.9
       
Total 22997.8 23938.2 26843.6
EXPENDITURES:      
Raw Material 7386.9 8447.0 9102.2
Excise Duty 1392.6 1437.5 1688.8
Power & Fuel Cost 766.9 850.7 1039.1
Other Manufacturing Expenses+ 2734.2 2637.3 2962.9
Employee Cost 1541.5 1600.1 1789.3
Selling & Administration Expenses 4185.7 4057.1 4564.0
Miscellaneous Expenses 516.5 544.4 436.2
Less: Preoperative Expenditure Capitalised      
Profit before Int. Dep. & Tax 4473.5 4364.1 5261.1
Depreciation 462.7 491.4 568.4
Profit before Tax 3991.5 3864.9 4690.6
Tax 1360.7 1345.7 1594.9
Profit after Tax 2630.8 2519.2 3095.7
       
Adjustment below Net Profit +      
P&L Balance B/F 250.0 442.3 34.5
Appropriations 2438.5 2927.0 3058.0
P&L Balance C/F 442.3 34.5 72.2
       
Equity Dividend 1928.3 2362.2 2410.4
Preference Dividend 0.00 0.00 0.00
Equity Dividend (%) 200 245 250
       
Earning Per Share(Rs.) 24.72 22.88 28.60
Book Value 34.74 33.13 36.73
 

Balance Sheet of “Cadbury Ltd.”

As Per Year ended 31st Dec. 2003, 2004 & 2005 (in Millions Rs.) 

Particulars: 2003 2004 2005

SOURES OF FUNDS:      
Capital 357.1 357.1 357.1
Reserves & surplus 3222.2 3602.8 3981.0
LOAN FUNDS      
Secured 74.6 10.8 37.1
Unsecured 48.8 62.7 45.1
       
TOTAL 3702.7 4033.4 4420.3
       
APPLICATION OF FUNDS:      
FIXED ASSETS      
Gross Block 3287.4 3497.0 3955.0
Less: Depreciation 1750.1 2037.6 2348.8
Net Block 1537.3 1459.4 1606.2
Capital W.I.P. 68.5 214.0 295.5
       
INVESTMENT 1273.4 2323.0 2582.1
       
CURRENT ASSETS:      
Inventories 947.6 982.8 1023.3
Sundry Debtors 241.3 245.8 106.8
Cash & bank Balance 348.9 101.32 184.0
Loans & advances 638.1 433.7 533.9
  2067.2 2519.8 2621.2
Less: Current     Liabilities & Provisions      
Current Liabilities+ 1224.6 1592.6 2050.9
Provisions 127.8 133.9 134.1
Net Current Assets 823.5 37.0 337.0
Miscellaneous Expenses not w/o+ 00.00 00.00 273.5
       
Total Assets 3702.7 4033.4 4420.3
Contingent Liabilities+ 571.3 588.3 665.4
 

Profit & Loss Account of “Cadbury Ltd.” 

As Per Year ended 31st Dec. 2003, 2004 & 2005 (In Millions.) 

Particulars 2003 2004 2005

INCOMES:      
Sales Turnover 8272.5 8852.8 10060.2
Other Income 189.8 183.6 178.7
Stock Adjustments 50.0 134.8 104.4
       
Total 8512.3 9171.2 10343.3
EXPENDITURES:      
Raw Material 1931.7 2224.9 2462.2
Excise Duty 1133.3 1212.3 1262.4
Power & Fuel Cost 168.0 161.7 196.2
Other Manufacturing Expenses+ 1133.3 1245.2 1388.5
Employee Cost 818.7 764.9 943.8
Selling & Administration Expenses 2027.6 2320.0 2583.1
Miscellaneous Expenses 254.3 243.0 338.0
Less: Preoperative Expenditure Capitalised      
Profit before Int. Dep. & Tax 1029.8 974.8 1152.1
Depreciation 308.9 339.5 340.7
Profit before Tax 720.9 635.3 811.4
Tax 264.4 173.2 351.9
Profit after Tax 456.5 462.1 459.5
       
Adjustment below Net Profit +      
P&L Balance B/F 874.1 1205.0 1550.7
Appropriations 125.6 116.4 116.4
P&L Balance C/F 1205.0 1550.7 1893.8
       
Equity Dividend 71.4 71.4 71.4
Preference Dividend 0.00 0.00 0.00
Equity Dividend (%) 200.00 200.00 200.00
       
Earning Per Share(Rs.) 12.53 12.66 12.59
Book Value 100.23 110.89 121.48

BIBLIOGRAPHY
 WEB SITES REFERRED
 www.nestle.com
 www.cadbury.com
 www.investsmartindia.com
 www.moneyoutlook.com
  www.in.finance.yahoo.com
 www.investsments.com
 www.indiainfoline.com
 www.bseindia.com
 www.cadburyindia.com
 www.cadburyschweppes.com

 BOOKS REFFERED
 

Name of the Books Name of the

Authors
o Management Accounting & Business Shashi K. Gupta
Finance
R.K. Sharma
o Financial Management Eugene F. Brigham

Michael C. Ehrhardt
 Statistical Methods S.P. Gupta

o Analysis of Financial Statements T.S. Grewal

 Financial Management I.M. Pandey

 Financial Management R.K. Sharma

Shashi K. Gupta
 Principles of Corporate Finance R.A. Brealey

S.C. Myers