Working Capital Management and FMCG Companies PDF

“WORKING CAPITAL MANAGEMENT AND FMCG COMPANIES”
A PROJECT SUBMITTED TO
UNIVERSITY OF MUMBAI FOR PARTIAL COMPLETION OF THE
DEGREE OF
MASTER IN COMMERCE
UNDER THE FACULTY OF COMMERCE
SUBMITTED BY :
NEHA MAHENDRA KOLI
G.R No. : 393
UNDER THE GUIDANCE OF

DR. RAJ SOSHTE SIR
NAGRIK SHIKSHAN SANSTHA’S COLLEGE OF COMMERCE AND

ECONOMICS
‘B’ WING, NSS EDUCATIONAL COMPLEX, M. P. MILLS COMPOUND,
TARDEO, MUMBAI - 400034
OCTOBER , 2018
WORKING CAPITAL MANAGEMENT AND FMCG
COMPANIES
“WORKING CAPITAL MANAGEMENT AND FMCG COMPANIES”
A PROJECT SUBMITTED TO
UNIVERSITY OF MUMBAI FOR PARTIAL COMPLETION OF THE DEGREE
OF
MASTER IN COMMERCE
UNDER THE FACULTY OF COMMERCE
SUBMITTED BY :
NEHA MAHENDRA KOLI
G.R No. : 393
UNDER THE GUIDANCE OF

DR. RAJ SOSHTE SIR
NAGRIK SHIKSHAN SANSTHA’S COLLEGE OF COMMERCE AND

ECONOMICS
‘B’ WING, NSS EDUCATIONAL COMPLEX, M. P. MILLS COMPOUND,
TARDEO, MUMBAI - 400034
OCTOBER , 2018
CERTIFICATE
Nagrik Shikshan Sanstha’s College Of Commerce And Economics
‘B’ Wing, Nss Educational Complex, M. P. Mills Compound, Tardeo, Mumbai

- 400034
This is to certify that Miss. NEHA MAHENDRA KOLI has worked and duly
completed her Project Work for the degree of Master in Commerce under the Faculty of
Commerce in the subject of Accountancy and her project is entitled, “WORKING
CAPITAL MANAGEMENT AND FMCG COMPANIES” under my supervision.
I further certify that the entire work has been done by the learner under my
guidance and that no part of it has been submitted previously for any Degree or Diploma
of any University.
It is her own work and facts reported by her personal findings and investigations.
Name and Signature of Guiding Teacher

DR. RAJ SOSHTE SIR
Seal of the
College
Date of Submission : 25th October, 2018

DECLARATION BY LEARNER
I the undersigned MISS. NEHA MAHENDRA KOLI here by, declare that the
work embodied in this project work titled “ WORKING CAPITAL MANAGEMENT
AND FMCG COMPANIES ” forms my own contribution to the research work carried
out under the guidance of MR. RAJ SOSHTE SIR is a result of my own research work
and has not been previously submitted to any other University for any other Degree/
Diploma to this or any other University. Wherever reference has been made to previous
works of others, it has been clearly indicated as such and included in the bibliography.
I, here by further declare that all information of this document has been obtained
and presented in accordance with academic rules and ethical conduct.
NEHA MAHENDRA KOLI

SIGN :
Certified by
DR. RAJ SOSHTE SIR

SIGN :
ACKNOWLEDGMENT
To list who all have helped me is difficult because they are so numerous and the depth is
so enormous.
I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me chance to do
this project.
I would like to thank my Principal, Mrs. Chandra Purakayastha of Nagrik Shikshan

Sanstha’s College Of Commerce And Economics for providing the necessary facilities
required for completion of this project.
I take this opportunity to thank our Coordinator for her moral support and guidance.
I would also like to express my sincere gratitude towards my project guide Dr. Raj
Soshte whose guidance and care made the project successful.
I would like to thank my College Library, for having provided various reference books
and magazines related to my project.
Lastly, I would like to thank each and every person who directly or indirectly helped me
in the completion of the project especially my Parents and Peers who supported me
throughout my project.
ABSTRACT
Working capital is the life blood and nerve centre of a business. Just as circulation of
blood is essential in the human body for maintaining life, working capital is very new line
essential to maintain the smooth running of a business. No business can run successfully without
an adequate amount of working capital. Working capital refers to that part of firm’s capital which
is required for financing short term or current assets such as cash, marketable securities, debtors,
and inventories.
In other words working capital is the amount of funds necessary to cover the cost of
operating the enterprise. The success of an organization to a greater extent depends upon the
effective management of working. It guarantees the financial soundness of the organization and
therefore keeps it away from the sickness zone. The present work therefore is a modest attempt
in this direction by undertaking a study of working capital management.
The current study has tried to examine the sources used by the companies to finance their
working capital requirements and to analyze and evaluate the working capital management. The
study has also examined the liquidity position of the companies. The scope of the study is
identified after and during the study is conducted. The main scope of the study is to check the
management of working capital (current assets and current liabilities) of only FMCG sector.
The study analyzed the liquidity position and working capital management of a limited
sample consisting of only five companies i.e. Nestle, HUL, Amul, ITC and Parle Agro. The study
of working capital is based on only one tool i.e. Ratio Analysis. Further the study is based on last
5 years Annual Reports of the five companies taken into consideration. As only FMCG sector
was studied so the findings could only be generalized to this sector s firms.
INDEX
• Chapter No. 1 : Introduction to Working Capital

a) Definition of Working Capital
b) Nature of Working Capital
c) Importance of Working Capital
d) Objectives of Working Capital
e) Classification of Working Capital
f) Components of Working Capital
• Chapter No. 2 : FMCG Companies

a) Introduction
b) Definition
c) FMCG Companies in India
• Chapter No. 3 : Literature Review
• Chapter No. 4 : Data Analysis, Interpretation and Presentation

a) FMCG Companies Annual Reports
b) Interpretation
• Chapter No. 5 : Research Methodology
• Chapter No. 6 : Hypothesis of the study
• Chapter No. 7 : Limitations
• Chapter No. 8 : Conclusions and Suggestions
• Chapter No. 9 : Abbreviations
• Chapter No. 10 : Bibliography

WORKING CAPITAL MANAGEMENT
INTRODUCTION :
Working capital decisions are important to the organization as they affect the firm’s
liquidity position. Accountants view working capital as the difference between the current assets
and the current liabilities. Working capital is alternatively referred to the investment of the firm
in the current assets. Working capital decisions affect the firm’s profits through their impact on
sales, operating costs, and interest expense. They affect the firm’s risk through their impact on
the volatility of cash flows, the probability of not receiving the cash flow and the ability of
generating cash during crisis. The working capital policy touches upon almost every functional
area of the business’s operation.
A firm is required to maintain a balance between liquidity and profitability while

conducting its day to day operations. Working capital management is important because it
consumes a large portion of the financial manager’s time. Working capital plays an important
role in the firm’s profitability, risk and value. A firm may choose an aggressive working capital
management policy with a low level of current assets as percentage of total assets, or it may also
be used for the financing decisions of the firm in the form of high level of current liabilities as
percentage of total liabilities. Liquidity is a precondition to ensure that firms are able to meet its
short-term obligations.
The firm by following a liberal credit policy may be in a position to push up its sales, but
its liquidity decreases. Company has to borrow less if it manages its working capital well. Even
cash has to be invested in such a way that it generates proper return to the investors. Firms are
able to reduce financing costs and/or increase the funds available for expansion by minimizing
the amount of funds tied up in current assets. Working capital is a common measure of a
company's liquidity, efficiency and overall health. Because it includes cash, inventory, accounts
receivable, accounts payable, the portion of debt due within one year, and other short-term
accounts, a company's working capital reflects the results of a host of company activities,
including inventory management, debt management, revenue collection, and payments to
suppliers.
When not managed carefully, businesses can grow themselves out of cash by needing
more working capital to fulfill expansion plans than they can generate in their current state. This
usually occurs when a company has used cash to pay for everything, rather than seeking
financing that would smooth out the payments and make cash available for other uses. As a
result, working capital shortages cause many businesses to fail even though they may actually
turn a profit. The most efficient companies invest wisely to avoid these situations. It is also
important to understand that the timing of asset purchases, payment and collection policies, the
likelihood that a company will write off some past-due receivables, and even capital-raising
efforts can generate different working capital needs for similar companies.
Equally important is that working capital needs vary from industry to industry, especially
considering how different industries depend on expensive equipment, use different
revenue accounting methods, and approach other industry-specific matters. Finding ways to
smooth out cash payments in order to keep working capital stable is particularly difficult for
manufacturers and other companies that require a lot of up-front costs. For these reasons,
comparison of working capital is generally most meaningful among companies within the same
industry, and the definition of a "high" or "low" ratio should be made within this context.
DEFINITION
Working capital management involves the relationship between a firm's short-term

assets and its short-term liabilities. The goal of working capital management is to ensure that a
firm is able to continue its operations and that it has sufficient ability to satisfy both maturing
short-term debt and upcoming operational expenses. The management of working capital
involves managing inventories, accounts receivable and payable, and cash.
Working capital management refers to a company's managerial accounting strategy

designed to monitor and utilize the two components of working capital, current assets and
current liabilities, to ensure the most financially efficient operation of the company. The primary
purpose of working capital management is to make sure the company always maintains sufficient
cash flow to meet its short-term operating costs.
NATURE OF WORKING CAPITAL
The nature of working capital is as discussed below:
i. It is used for purchase of raw materials, payment of wages and expenses.
ii. It changes form constantly to keep the wheels of business moving.
iii. Working capital enhances liquidity, solvency, creditworthiness and reputation of the
enterprise.
iv. It generates the elements of cost namely: Materials, wages and expenses.
v. It enables the enterprise to avail the cash discount facilities offered by its suppliers.
vi. It helps improve the morale of business executives and their efficiency reaches at the
highest climax.
vii. It facilitates expansion programmes of the enterprise and helps in maintaining
operational efficiency of fixed assets.
IMPORTANCE OF WORKING CAPITAL
It is said that working capital is the lifeblood of a business. Every business needs funds in
order to run its day-to-day activities.The importance of working capital can be better understood
by the following:
i. It helps measure profitability of an enterprise. In its absence, there would be neither

production nor profit.
ii. Without adequate working capital an entity cannot meet its short-term liabilities in
time.
iii. A firm having a healthy working capital position can get loans easily from the market
due to its high reputation or goodwill.
iv. Sufficient working capital helps maintain an uninterrupted flow of production by
supplying raw materials and payment of wages.
v. Sound working capital helps maintain optimum level of investment in current assets.
vi. It enhances liquidity, solvency, credit worthiness and reputation of enterprise.
vii. It provides necessary funds to meet unforeseen contingencies and thus helps the
enterprise run successfully during periods of crisis.

OBJECTIVES OF WORKING CAPITAL
To analyse the impact of management of working capital on the profitability of firms in

BSE’s FMCG sector. For the purpose of our study, we have considered FMCG sector listed in
BSE sectoral indices. The primary objective of working capital management is to ensure smooth
operating cycle of the business. Secondary objectives are to optimize the level of working
capital and minimize the cost of such funds. Balance sheet data sourced from the published
annual statements of the company had been used from the analysis of working capital levels of a
company. Various ratios and the NWC over the past 5 years have been calculated for the selected
companies.
SMOOTH WORKING CAPITAL OPERATING CYCLE
This implies that the operating cycle i.e. the cycle starting from the acquisition of raw
material to its conversion to cash should be smooth. It is not easy; it is as good as circulating 5
balls with two hands without dropping a single one.
If following 6 points can be managed, this operating cycle can be management well :
• It means raw material should be present on the requirement and it should not be a cause
to stoppages of production.
• All other requirements of production should be in place before time.
• The finished goods should be sold as early as possible once they are produced and
inventoried.
• The accounts receivable should be collected on time.
• Accounts payable should be paid when due without any delay.
• Cash should be available as and when required along with some cushion.
LOWEST WORKING CAPITAL
Working capital here refers to the current assets less current liabilities (net working
capital). It should be optimized because higher working capital means higher interest cost and
lower working capital means a risk of disturbance of operating cycle.
MINIMIZE RATE OF INTEREST OR COST OF CAPITAL
The cost of capital utilized on working capital should be minimized so as to achieve

higher profitability. If the investment in working capital involves bank finance, interest rates
should be negotiated with the bank.
Cost can be minimized by utilizing long-term funds but in a proper mix. While deciding
the mix of working capital, the fundamental principle of financial management should be kept in
mind that fixed assets and permanent assets should be financed by long term sources of
finance of approximately same maturity and short-term or temporary assets should be financed
by short-term sources of finance.
OPTIMAL RETURN ON CURRENT ASSET INVESTMENT
The return on the investment made in current assets should be more than the weighted
average cost of capital so as to ensure wealth maximization of the owners. In other words, the
rate of return earned due to investment in current assets should be more than the rate of interest
or cost of capital used for financing the current assets.
CLASSIFICATION OF WORKING CAPITAL
Working capital may be of different types as follows:
(a) Gross Working Capital:

Gross working capital refers to the amount of funds invested in various components of
current assets. It consists of raw materials, work in progress, debtors, finished goods, etc.
(b) Net Working Capital:

The excess of current assets over current liabilities is known as Net working capital. The
principal objective here is to learn the composition and magnitude of current assets required to
meet current liabilities.
(c) Positive Working Capital:

This refers to the surplus of current assets over current liabilities.
(d) Negative Working Capital:

Negative working capital refers to the excess of current liabilities over current assets.
(e) Permanent Working Capital:

The minimum amount of working capital which even required during the dullest season
of the year is known as Permanent working capital.
(f) Temporary or Variable Working Capital:

It represents the additional current assets required at different times during the operating
year to meet additional inventory, extra cash, etc.
It can be said that Permanent working capital represents minimum amount of the current
assets required throughout the year for normal production whereas Temporary working capital is
the additional capital required at different time of the year to finance the fluctuations in
production due to seasonal change. A firm having constant annual production will also have
constant Permanent working capital and only Variable working capital changes due to change in
production caused by seasonal changes.
Similarly, a growth firm is the firm having unutilized capacity, however, production and
operation continues to grow naturally. As its volume of production rises with the passage of time
so also does the quantum of the Permanent working capital.
COMPONENTS OF WORKING CAPITAL

Working capital is composed of various current assets and current liabilities, which are as
follows:
(A) Current Assets : These assets are generally realized within a short period of time, i.e.
within one year. Current assets include :
(a) Inventories or Stocks - (i) Raw materials, (ii) Work in progress, (iii) Consumable Stores, (iv)
Finished goods
(b) Sundry Debtors
(c) Bills Receivable
(d) Pre-payments
(e) Short-term Investments
(f) Accrued Income and
(g) Cash and Bank Balances
(B) Current Liabilities : Current liabilities are those which are generally paid in the ordinary
course of business within a short period of time, i.e. one year. Current liabilities include :
(a) Sundry Creditors

(b) Bills Payable
(c) Accrued Expenses
(d) Bank Overdrafts
(e) Bank Loans (short-term)
(f) Proposed Dividends
(g) Short-term Loans
(h) Tax Payments Due
ELEMENTS OF WORKING CAPITAL MANAGEMENT
The working capital ratio, calculated as current assets divided by current liabilities, is
considered a key indicator of a company's fundamental financial health since it indicates the
company's ability to successfully meet all of its short-term financial obligations. Although
numbers vary by industry, a working capital ratio below 1.0 is generally indicative of a company
having trouble meeting its short-term obligations. Working capital ratios of 1.2 to 2.0 are
considered desirable, but a ratio higher than 2.0 may indicate a company is not effectively using
its assets to increase revenues.
The collection ratio, also known as the average collection period ratio, is a principal
measure of how efficiently a company manages its accounts receivables. The collection ratio is
calculated as the product of the number of days in an accounting period multiplied by the
average amount of outstanding accounts receivables divided by the total amount of net credit
sales during the accounting period. The collection ratio calculation provides the average number
of days it takes a company to receive payment. The lower a company's collection ratio, the more
efficient its cash flow.
The final element of working capital management is inventory management. To operate

with maximum efficiency and maintain a comfortably high level of working capital, a company
must carefully balance sufficient inventory on hand to meet customers' needs while avoiding
unnecessary inventory that ties up working capital for a long period before it is converted into
cash. Companies typically measure how efficiently that balance is maintained by monitoring the
inventory turnover ratio. The inventory turnover ratio, calculated as revenues divided by
inventory cost, reveals how rapidly a company's inventory is being sold and replenished. A
relatively low ratio compared to industry peers indicates inventory levels are excessively high,
while a relatively high ratio indicates the efficiency of inventory ordering can be improved.
2. FMCG COMPANIES
INTRODUCTION :
Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG) are

products that are sold quickly, and at relatively low cost. Examples include non -durable goods
such as packaged foods, beverages, toiletries, over-the-counter drugs, and
other consumables. There is a large online market called brand communities that have created the
demand for these types of products. The ongoing growth of the internet over the past quarter
century has created the demand.
The fast-moving consumer goods (FMCG) sector is an important contributor to India’s

GDP growth. The sector includes food & dairy products, packaged food products, household
products, drinks and others. FMCG is the fourth largest sector in Indian economy and provides
employment to around 3 million people accounting for approximately 5% of the total factory
employment in India. The sector is characterized by strong presence of leading multinational
companies, competition between organized and unorganized players, well established
distribution network, and low operational cost. Growth in the country’s FMCG sector is being
fuelled by improving scenario in both demand as well as supply side.
Major demand side drivers include growing affluence and appetite for consumption of the
Indian consumer, growing youth population, rise in per capita expenditure, and increasing brand
consciousness. On the other hand, easier import of materials and technology, reduced barriers to
entry of foreign players, and new product development, rapid real estate infrastructure
development and improvement in supply chain efficiency are the major supply side drivers for
the sector. The growth of the FMCG sector, which primarily includes Food & beverages,
personal care and household care has been driven in both the rural and urban segments. Rural
consumption growth has outpaced urban consumption with the increase in percentage in monthly
per capita expenditure in rural markets surpassing its urban counterparts over the past five years.
Several government measures such as GST Bill, Food Security Bill and FDI in retail sector are
expected to have a significant positive impact on the country’s FMCG sector in the coming
years.
DEFINITION
The Fast Moving Consumer Goods (FMCG) industry primarily deals with the production,
distribution and marketing of consumer packaged goods, i.e. those categories of products that are
consumed at regular intervals. Examples include food & beverage, personal care,
pharmaceuticals, plastic goods, paper & stationery and household products etc. The industry is
vast and offers a wide range of job opportunities in functions such as sales, supply chain, finance,
marketing, operations, purchasing, human resources, product development and general
management
FMCG is the 4th largest sector in the Indian economy Household and Personal Care is
the leading segment, accounting for 50 per cent of the overall market. Hair care (23 per cent) and
Food and Beverages (19 per cent) comes next in terms of market share Growing awareness,
easier access and changing lifestyles have been the key growth drivers for the sector. The number
of online users in India is likely to cross 850 million by 2025. Retail market in India is estimated
to reach US$ 1.1 trillion by 2020 from US$ 672 billion in 2016, with modern trade expected to
grow at 20 per cent - 25 per cent per annum, which is likely to boost revenues of FMCG
companies. People are gracefully embracing Ayurveda products, which has resulted in growth of
FMCG major, Patanjali Ayurveda, with a revenue of US$ 1.57 billion in FY17. The company
aims to expand globally in the next 5 to 10 years.
The Indian FMCG sector is the fourth largest sector in the economy with an estimated
size of Rs.1,300 billion. The sector has seen tremendous average annual growth of about 11% per
annum over the last decade. In India, the scenario is quite different in comparison to developed
nations where the market is dominated by few large players, whereas FMCG market in India is
highly competitive and a significant part of the market includes unorganized players selling
unbranded and unpackaged products.
Approximately 12-13 million retail stores exist across India, the large percentage of
which around 9 million are kirana stores. India FMCG sectors’ comprises of few significant
characteristics like well connected distribution network, high level of competition between the
organized and unorganized FMCG players, and low operational cost. In India, FMCG companies
have privilege of having easy availability of raw materials, cheaper labour costs and presence
across the entire value chain gives India a competitive advantage.
Products which have a swift turnover and relatively low cost are known as Fast Moving
Consumer Goods (FMCG). FMCG items are those which generally get replaced within a year.
Examples of FMCG commonly include the range of daily consumed items such as toiletries,
soap, detergents, cosmetics, oral care products, shaving products, packaged food products and
digestives as well as other non-durables such as bulbs, batteries, paper products, glassware and
plastic goods. FMCG may also include pharmaceuticals, consumer electronics, etc.
Indian population is spreading and becoming wealthy day by day, particularly the middle
class and the rural segments, offers immense opportunity which is left untapped to FMCG
players. Growth effect will be seen from product customization in the matured product categories
like skin care, processed and packaged food, mouth wash etc. In India, many MNCs have made
their presence through their subsidiaries (HUL, Reckitt Benckiser, P&G) and the companies
launches innovative products from their parent’s portfolio in the market regularly to ensure the
steady growth.
India is a agriculture based economy and has a varied agro-climatic condition which
offers extended raw material base suitable for many FMCG sub sections like food processing
industries etc. India is one among those countries which has the highest production of livestock,
milk, spices, sugarcane, cashew, and coconut and has the second highest production of wheat,
rice, vegetables and fruits. Similarly, India has an abundant supply of caustic soda and soda ash,
the major raw materials required to manufacture soaps and detergents, which helps companies
manufacturing soaps and detergents to grow and prosper.
The market growth over the past 5 years has been phenomenal, primarily due to
consumers’ growing disposable income which is directly linked to an increased demand for
FMCG goods and services. Indeed, it is widely acknowledged that the large young population in
the rural and semi-urban regions is driving demand growth, with the continuous rise in their
disposable income, life style, food habits etc. On the supply side, the wide availability of raw
materials, vast agricultural produce, low cost of labor and increased organized retail have helped
the competitiveness of players.
FMCG COMPANIES IN INDIA
LIST OF TOP 5 FMCG COMPANIES IN INDIA

1. Hindustan Unilever Limited (HUL)
We put Hindustan Unilever Limited at the top position in the Indian FMCG brand list.
More than 2 billion of people use the products of this company on regular basis.The company
has a wide range of products in the categories like food and beverages, personal care, home care
and water purifying segments. The company has more than 35 prestigious brands like Dove,
Knor, Lifeboy, Ponds, Lakme, Surf Excel, Elle18, Broke Bond, Kwality, Sunlight and much
more.
Corporate Office : Mumbai, Maharashtra
Turnover : 4.0 Billion Dollar
Employees : 16000+
Company Website : https://www.hul.co.in/
2. Amul
Amul is one of the most reputed and prestigious Indian brands in the food and beverages
consumer goods sector. Additionally, the company has been a pioneer in the fields of the
departments of milk and milk products. Almost every Indian knows the company as The Taste of
India – the most popular tagline of Amul.
Under the brand name Amul, the company has a wide range of consumer food items. This
list includes packaged milk, butter, cheese, ice cream, dahi, ghee, milk powder, chocolates etc.
Corporate Office : Anand, Gujrat
Employees : 700+
Company Website : http://www.amul.com/
3. ITC Limited
ITC stands for India Tobacco Company. Apart from the fast moving consumer items the
company operates in the hospitality, paper, packaging, agri-business, and IT sectors. In the
FMCG segment, the company has a wide range of products. The list includes Foods, Personal
Care, Cigarettes and Cigars, Branded Apparel, Education and Stationery Products, Incense Sticks
and Safety Matches. Some of the most popular product brands are Ashirvaad atta, Bingo chips,
Savlon, Mangaldeep agarbatti, Wills, Fiama, Vivel etc.
Corporate Office : Kolkata, WB Turnover – 7.0 Billion Dollar |
Employees : 29000+
Company Website : http://www.itcportal.com/
4. Nestle
Basically, Nestle is a Swiss company having the headquarter in the Switzerland.
Nowadays, Nestle is one of the largest food company globally. The company has more than 140
years of experience in the food manufacturing and distribution industry.The company deals with
a wide range of products in different segments. Basically, the milk products and nutrition,
beverages, prepared dishes and cooking aids, chocolates and confectionery, vending and food
services are the major operational segments of the company. EveryDay, Nescafe, KitKat, Maggi,
Milkmade, Nestea, Munch are the most popular brands of the company.
Corporate Office : Vevey, Switzerland
Employees : 328000+
Company Website : https://www.nestle.in/
5. Parle Agro
Parle Agro is an Indian company. Basically, the company operates in the food and
beverages industry. the company has several popular brands in the beverages and confectionery
segment. Some of the most popular products are Frooti, Appy Fizz, Hippo, Parle G, Bailley
etc.The company has made the position in the consumer interest through the biscuit and canned
fruit juice items majorly.
Corporate Office : Mumbai, Maharashtra
Turnover : 1 Billion dollar (Approx)
Employees : 2500+
Company Website : http://parleagro.com/
3. LITERATURE REVIEW
Literature review shows that researchers have conducted a number of studies in

manufacturing sector and telecom sector. We could not find a study on working capital
management policy of FMCG sector which was one of the reasons for motivating us to conduct a
similar kind of study in this sector. Moreover, there is a huge demand for fast moving consumer
goods in India. An average Indian spends around 40 per cent of his income on grocery and 8 per
cent on personal care products.
The large share of fast moving consumer goods (FMCG) in total individual spending
along with the large population base is another factor that makes India one of the largest FMCG
markets. Even on an international scale, total consumer expenditure on food. Moreover, with
increasing raw material prices, gross margins continue to witness pressure despite price hikes
taken by FMCG sector companies. Companies took selective price hikes so as to protect volume
growth.
These price hikes were not enough to mitigate the impact of increase in raw material
prices. Due to increase in raw material cost, gross margins and consequently earnings before
interest tax depreciation and amortisation margins contracted for the companies. Faced with
rising costs and competition, Indian FMCG companies are increasingly betting on expanding
their geographical footprint with overseas acquisitions, expecting higher returns from
international operations to offset lower growth in India. All these make working capital
management in this sector extremely important.
FMCG COMPANIES ANNUAL REPORTS
HINDUSTAN UNILIVER LIMITED (HUL)

(2014 – 2018)
BALANCE SHEET - HINDUSTAN UNILEVER LTD.
Rs. (in Crores)
Particulars Mar'18 Mar'17 Mar'16 Mar'15 Mar'14
12 12 12 12 12
Liabilities Months Months Months Months Months
Share Capital 216.00 216.00 216.00 216.35 216.27
Reserves & Surplus 6859.00 6274.00 6063.00 3507.76 3060.11
Net Worth 7075.00 6490.00 6279.00 3724.78 3277.05
Secured Loan .00 .00 .00 .00 .00
Unsecured Loan .00 .00 .00 .00 .00
TOTAL LIABILITIES 7075.00 6490.00 6279.00 3724.78 3277.05
Assets
Gross Block 5234.00 4689.00 3207.00 4430.63 4162.92
(-) Acc. Depreciation 1092.00 665.00 293.00 1973.10 1740.86
Net Block 4142.00 4024.00 2914.00 2456.86 2421.39
Capital Work in Progress 430.00 203.00 386.00 479.01 319.78
Investments 3111.00 3779.00 2780.00 3277.93 3094.12
Inventories 2359.00 2362.00 2528.00 2602.68 2747.53
Sundry Debtors 1147.00 928.00 1064.00 782.94 816.43
Cash and Bank 3373.00 1671.00 2759.00 2537.56 2220.97
Loans and Advances 2587.00 1784.00 1489.00 1496.41 1377.51
Total Current Assets 9466.00 6745.00 7840.00 7419.59 7162.44
Current Liabilities 8651.00 7389.00 6757.00 6367.06 6925.65

Provisions 1423.00 872.00 884.00 3542.22 2795.70
Total Current Liabilities 10074.00 8261.00 7641.00 9909.28 9721.35
NET CURRENT ASSETS -608.00 -1516.00 199.00 -2489.69 -2558.91
Misc. Expenses .00 .00 .00 .00 .00
TOTAL
ASSETS(A+B+C+D+E) 7075.00 6490.00 6279.00 3724.78 3277.05
A GRAPH BELOW SHOWS THE MARKET SHARE OF HUL Co.
INDIAN TOBACCO COMPANY LIMITED (ITC. Ltd)

(2014 – 2018)
BALANCE SHEET - ITC LTD.
Rs (in Crores)

12 12 12 12 12
Share Capital 1220.43 1214.74 804.72 801.55 795.32
Net Worth 51400.07 45340.96 32929.00 30735.69 26262.02
Secured Loan .00 .01 3.60 .02 .14
Unsecured Loan 11.13 17.99 25.83 38.69 51.00
Assets
Gross Block 18595.00 16843.67 22256.11 21392.12 18239.65
Net Block 15565.99 14880.24 14204.53 14126.08 11960.33
Investments 23397.22 18585.29 12854.24 8405.46 8823.43
Inventories 7237.15 7863.99 8519.82 7836.76 7359.54
Sundry Debtors 2357.01 2207.50 1686.35 1722.40 2165.36
Cash and Bank 2594.88 2747.27 6563.95 7588.61 3289.37
Provisions 161.15 173.20 8430.78 6206.81 5994.71
NET CURRENT ASSETS 7422.41 8356.41 3398.83 6076.31 3181.26
Misc. Expenses .00 .00 .00 .00 .00
TOTAL
ASSETS(A+B+C+D+E) 51411.20 45358.96 33010.84 30774.40 26313.16
NESTLE INDIA LTD.
(2013 - 2017)
BALANCES HEET – NESTLE INDIA LTD.
Rs (in Crores)
Particulars Dec’17 Dec’16 Dec’15 Dec’14 Dec’13
12 12 12 12 12
Share Capital 96.42 96.42 96.42 96.42 96.42
Net Worth 3420.59 3013.70 2817.84 2837.21 2368.75
Secured Loan 984.64 .00 .90 4.11 .01
Unsecured Loan 35.14 33.15 16.83 15.46 1189.48
Assets
Gross Block 3358.43 5201.10 5058.48 4950.10 4844.28
Net Block 2616.18 2729.46 2897.85 3176.64 3369.31

Investments 1978.87 1749.35 1324.92 811.82 851.08
Inventories 902.47 943.18 820.81 844.10 735.93
Sundry Debtors 88.97 97.93 78.42 99.10 84.27
Cash and Bank 1457.42 880.00 499.55 445.82 749.36
Provisions 2379.05 2292.91 1862.49 1601.72 1407.27
NET CURRENT ASSETS -248.84 -1620.13 -1617.99 -1376.46 -956.86
Misc. Expenses .00 .00 .00 .00 .00
TOTAL
ASSETS(A+B+C+D+E) 4440.37 3046.85 2835.57 2856.78 3558.24
PARLE AGRO LTD.

(2014 – 2018)
BALANCE SHEET – PARLE AGRO LTD.
Rs (in Crores)
Particulars Mar’18 Mar’17 Mar’16 Mar’15 Mar’14
12 12 12 12 12
Share Capital 14.00 14.00 14.00 14.00 14.00
Net Worth 19.76 19.75 19.71 19.70 19.71
Secured Loan .00 .00 .00 .00 .00

Unsecured Loan .00 .00 .00 .00 .00
Assets
Gross Block 2.53 .40 .40 .40 .44
(-) Acc. Depreciation .00 .36 .35 .33 .31
Net Block 2.53 .03 .05 .07 .13
Capital Work in Progress .00 .00 .00 .00 .00
Investments .00 .00 .00 .00 .00
Inventories 17.23 17.23 .00 .00 .00
Sundry Debtors .07 .05 .06 .05 .16
Cash and Bank .02 .26 .23 .17 .16
Loans and Advances .04 2.27 19.44 19.47 19.31
Current Liabilities .10 .05 .04 .02 .01
Provisions .03 .04 .03 .04 .03
Total Current Liabilities .13 .09 .07 .06 .05
NET CURRENT ASSETS 17.23 19.72 19.66 19.64 19.58
Misc. Expenses .00 .00 .00 .00 .00
TOTAL
ASSETS(A+B+C+D+E) 19.76 19.75 19.71 19.70 19.71
AMUL
(2014 – 2018)
BALANCE SHEET – AMUL
Rs (in Crores)
12 12 12 12 12
Share Capital 4.89 4.89 4.89 4.89 4.89
Net Worth 98.20 90.35 35.54 34.60 33.65
Secured Loan 61.67 72.32 77.83 65.08 57.39
Unsecured Loan 1.26 2.94 3.82 9.17 12.21
Assets
Gross Block 174.98 170.14 163.74 158.95 151.72

Net Block 163.32 164.78 100.06 101.34 100.50
Investments .02 .02 .02 .02 .02
Inventories 74.55 75.14 64.62 88.58 81.41
Sundry Debtors 4.86 16.25 17.16 14.99 7.72
Cash and Bank .75 1.07 1.61 1.78 1.05
Provisions 2.62 2.12 2.04 2.26 1.90
NET CURRENT ASSETS -5.65 -2.67 15.56 6.03 .49
Misc. Expenses .00 .00 .00 .00 .00
TOTAL
ASSETS(A+B+C+D+E) 161.13 165.61 117.19 108.85 103.25
RESEARCH METHODOLOGY
PERIOD OF THE STUDY:
The core objective of the present study is to analyze financial performance of top ten
FMCG companies during the study period of 2007-08 to 2016-17. Total study period is ten years
from 2007-08 to 2016-17.
DATA COLLECTION:
The source of data for this study was predominantly from secondary sources. i.e. study is
mainly based on the secondary data taken from the annual reports of selected units and Accord
data base website (www.acekp.in). And all the data relating to history, growth and development
of Industries have been collected mainly from the books and magazine relating to the industry
and published paper, report, article and from the various news papers, bulletins and other various
research reports published by industry and research organization and websites of the selected
units. The data relating to the selected units under study have been obtained from prospectus,
pamphlets and annual reports of the selected units.
SCOPE OF THE STUDY:
The core objective of the present study is to analyze financial performance of selected
FMCG companies during the study period of 2007-08 to 2016-17. The financial performance can
be analyzed by profitability ratios, liquidity ratios and leverage related ratios. The hypotheses
have been tested by ANOVA test.
SIGNIFICANCE OF THE STUDY: -
A) Contribution to the knowledge: -Through this study my knowledge particularly regarding

various ratios will be improved.Through this study my knowledge particularly regarding various
statistical tools and techniques and statistical tests is improved.Analytical power of researcher
will be improved.
B) Contribution to the society: -Through this research society will be able to know the real
situation of the liquidity and profitability position, of selected units during the study
period.Through this study creditors and other parties can take proper decision.Employees will be
able to take proper decision regarding job.
C) Contribution to the Industry: -Industry may be able to maintain their Liquidity and
Profitability position during the study period.Industry may be able to know the real situation of
management control system.
HYPOTHESIS OF THE STUDY
The hypotheses of the present research have been formulated as under:
NULL HYPOTHESIS:
There is no significant difference in profitability performance of selected FMCG companies

during the study period.
There is no significant difference in liquidity performance of selected FMCG companies during

the study period.
There is no significant difference in leverage performance of selected FMCG companies during

the study period.
ALTERNATE HYPOTHESIS:
There is significant difference in profitability performance of selected FMCG companies during

the study period.
There is significant difference in liquidity performance of selected FMCG companies during the
study period.
There is significant difference in leverage performance of selected FMCG companies during the
study period.
TOOLS OF ANALYSIS
Ratio Analysis: Ratios are among the well known and most widely used tools of financial
analysis. Ratio can be defined as “The indicated quotient of two mathematical expression”. An
operational definition of ratio is the relationship between one item to another expressed in simple
mathematical form.
Average: The most commonly used average is the arithmetic mean, briefly referred to as
the mean. The mean can be found by adding all the variables and dividing it by total number of
years taken. It gives a brief picture of a large group, which it represents and gives a basic of
comparison with other groups.
The Standard Deviation: The standard deviation concept was introduced by Karl –
Pearson in 1823. It is by far the most important and widely used measure of studying Dispersion.
Standard Deviation is also known as root mean square deviation for the reason that it is the
square root of the mean of the squared deviation from arithmetic mean. Standard deviation is
denoted by small Greek letter “σ”.5 (Read as sigma)
Analysis of Variance: Prof. R. A. Fisher was the first man to use the term, ‘Variance’ and
in fact, it was he who developed a very elaborate theory concerning ANOVA, explaining its
usefulness in practical field. ANOVA is essentially a procedure for testing the difference among
different groups of data for homogeneity. There may be variation between samples and also
within sample items. ANOVA consists in splitting the variance for analytical purpose. Hence, it
is a method of analyzing the variance to which response is subject into its various components
corresponding to various sources of variation. For the testing of hypothesis ANOVA test has been
applied by the researcher.
LIMITATIONS OF THE STUDY

The major limitations of this study are as under:
1. This study is mainly based on secondary data derived from the annual reports of selected
units.
2. The reliability and the finding are contingent upon the data published in annual report.
3. The study is limited to five years only.
4. Accounting ratios have its own limitation, which also applied to the study.
5. As the study is purely based on five leading FMCG companies, so the results of the study
are only indicative and not conclusive.
6. There are many approaches for evaluation of financial performance. There are no some
common views among experts.
7. Financial analysis do not respect those facts which cannot be expressed in terms of
money, for example – efficiency of workers, reputation and prestige of the management.
8. Inflation plays vital role in Indian Economy. If we do not considered inflation when
analysis of financial condition, is studied, evaluation may be not truly representative. In
this study the effect of inflation is not considered which its limitation becomes.
ANALYSIS AND INTERPRETATION

ANALYSIS OF PROFITABILITY PERFORMANCE :
Following ratios have been selected by the researcher for the study of profitability performance
of selected units:
1. Operating Profit Ratio
2. Net Profit Ratio
3. Earning Per Share
4. Dividend Per Share
5. Dividend Payout Ratio

OPERATING PROFIT RATIO :
Operating ratio is also known as operating expenses ratio. It is an important ratio that
explains the changes in profit margin ratio. Operating ratio matches with the cost of goods sold
plus other operating expenses on the one hand with net sales on the other. The ratio is computed
by dividing operating expenses such as cost of goods sold plus selling expenses and general and
administrative expenses (excluding interest) dividing by sales.
Operating Profit Ratio= Operating profit (EBIT) X 100

Net Sales
A higher operating ratio is unfavorable. To get the comprehensive idea of the behaviour
of operating expenses variations in the ratios over a number of years should be studied.
Operating Profit Ratio of selected units (percentage) :
Year ITC HUL BIL NIL DIL ML GCPL GCHL CPIL P&G
2007-08 21.14 14.76 9.25 17.26 17.71 12.29 19.57 17.90 18.90 27.58
2008-09 20.66 14.09 7.91 17.32 18.13 10.42 17.23 17.12 19.70 29.91
2009-10 22.94 14.90 3.76 17.59 18.77 15.35 23.39 17.67 24.02 25.53
2010-11 23.31 14.23 5.54 17.97 18.37 17.27 21.70 18.69 21.89 17.00
2011-12 25.08 14.97 5.77 18.10 15.83 14.41 25.03 18.67 21.03 17.11
2012-13 25.63 18.26 6.49 18.33 17.46 17.18 17.18 19.34 19.95 16.85
2013-14 26.38 17.13 8.53 18.20 17.88 20.27 17.51 19.77 19.20 22.53
2014-15 27.19 18.96 12.03 17.57 17.92 15.95 18.41 19.64 18.41 21.46
2015-16 27.11 17.80 14.45 9.63 22.49 19.55 20.54 23.18 19.21 27.32
2016-17 27.36 18.61 14.42 15.12 24.41 23.72 22.47 22.92 18.84 28.20
Avg. 24.68 16.37 8.81 16.70 18.89 16.64 20.30 19.49 20.11 23.34
Min. 20.66 14.09 3.76 9.63 15.83 10.42 17.18 17.12 18.41 16.85
Max 27.36 18.96 14.45 18.33 24.41 23.72 25.03 23.18 24.02 29.91
ANALYSIS :
The above table and chart shows the operating profit ratio of selected units during the
study period of 2007-08 to 2016-17. It shows the mixed trend during the study period in all the
selected units. The average operating profit ratio was the highest in ITC with 24.68% and it was
the lowest in BIL with 8.81% during the study period. The Minimum operating profit ratio was
the highest in ITC with 20.66% and it was the lowest again in BIL with 3.76% during the study
period. The maximum operating profit ratio was the highest in P & G with 29.91% and it was the
lowest in BIL with 14.45% during the study period. In ITC it is the highest in the year 2014-15
with 27.36% and the lowest in the year 2008-09 with 20.66%.
In HUL it is the highest in the year 2014-15 with 18.96% and the lowest in the year 2008-
09 with 14.09%. In BIL it is the highest in the year 2015-16 with 14.45% and the lowest in the
year 2009-10 with 3.76%. In NIL it is the highest in the year 2012-13 with 18.33% and the
lowest in the year 2015-16 with 9.63%. In DIL it is the highest in the year 2016-17 with 24.41%
and the lowest in the year 2011-12 with 15.83%. In ML it is the highest in the year 2016-17 with
23.72% and the lowest in the year 2008-09 with 10.42%. In GCPL it is the highest in the year
2011-12 with 25.03% and the lowest in the year 2012-13 with 17.18%. In GCHL it is the highest
in the year 2011-12 with 23.18% and the lowest in the year 2008-09 with 17.12%.
In CPIL it is the highest in the year 2009-10 with 24.02% and the lowest in the year
2014-15 with 18.41%. In P &G it is the highest in the year 2008-09 with 29.91% and the lowest
in the year 2012-13 with 16.85%.
HYPOTHESIS TESTING :
The hypothesis of the ratio is:
H0 : There is no significance difference in means score operating profit ratio in selected units
during the study period
H1 : There is significance difference in means score operating profit ratio in selected units
For the testing of hypothesis ANOVA test has been applied as under:
H0 = u1 = u2
H1 = u1 ≠ u2
5% level of significance table value of F = 1.985
The calculated value of F is 2.171 and table value of F is 1.985 (at 5% level of
significance). Hence, FC > FTThe calculated value of ‘F’ is more than the table value. The Null
Hypothesis is rejected. The results are not as per the expectation i.e. There is significance
difference in means score operating profit ratio in selected units during the study period.
ANOVA test analysis of operating profit
5% Limit
Source of
S.S. d.f. M.S. F ratio (From F
Variance
Table)
Between
1736.84 9 192.982
Sample
Within 2.171 1.985
842.13 90 9.357
Sample
2578.97 99 202.339
NET PROFIT RATIO :
This ratio indicates the portion of sales which is left to, the proprietor after all costs,
charges and expenses have been deducted. This is the ratio of net income or profit after taxes to
sales. The ratio is very used a measure of overall profitability. Net profit ratio focuses on the non-
operating activities. It is calculated as bellows:
Net Profit Ratio = Net Profit X 100

Sales
This ratio helps in determining the efficiency with which affairs of the business are being
managed. An increase in the ratio over the previous period indicates improvement in the
operational efficiency of the business provided the gross profit ratio is constant. The ratio is thus
an effective measure to check the profitability of business. This ratio is the overall measure of the
firms ability to turn each rupee sales into net profit.
Net Profit Ratio of selected units (percentage) :
2007-08 14.25 11.85 7.30 11.35 14.96 9.30 16.13 11.66 14.92 20.07
2008-09 13.79 11.55 5.74 11.95 15.41 7.40 14.29 11.08 16.51 23.09
2009-10 15.24 11.54 3.40 12.54 15.05 11.60 19.17 11.49 20.91 19.64
2010-11 15.70 11.17 3.41 12.84 14.24 13.41 17.05 12.34 16.89 14.51
2011-12 17.10 11.61 3.71 12.49 12.20 11.35 19.49 12.20 15.91 13.90
2012-13 17.62 13.92 4.10 12.40 13.43 12.58 13.48 12.97 14.94 11.96
2013-14 18.13 13.08 5.76 11.86 13.64 15.65 13.13 13.12 14.24 14.61
2014-15 18.37 13.19 8.47 11.64 13.85 11.63 13.92 12.88 13.19 14.67
2015-16 17.24 12.35 9.59 6.64 17.28 14.20 14.80 15.06 13.36 17.99
2016-17 17.83 13.02 9.72 9.70 18.59 17.31 16.66 14.85 12.77 17.89
Avg. 16.52 12.32 6.12 11.34 14.86 12.44 15.81 12.76 15.36 16.83
Min. 13.79 11.17 3.40 6.64 12.20 7.40 13.13 11.08 12.77 11.96
Max 18.37 13.92 9.72 12.84 18.59 17.31 19.49 15.06 20.91 23.09
ANALYSIS:
The above table and chart shows the net profit ratio of selected units during the study
period of 2007-08 to 2016-17. It shows the mixed trend during the study period in all the selected
units. The average net profit ratio was the highest in P & G with 16.83% and it was the lowest in
BIL with 6.12% during the study period. The Minimum net profit ratio was the highest in ITC
with 13.79% and it was the lowest again in BIL with 3.40% during the study period. The
maximum net profit ratio was the highest in P & G with 23.09% and it was the lowest in BIL
with 9.72% during the study period. In ITC it is the highest in the year 2014-15 with 18.37% and
the lowest in the year 2008-09 with 13.79%.
In HUL it is the highest in the year 2012-13 with 13.92% and the lowest in the year 2010-
11 with 11.17%. In BIL it is the highest in the year 2016-17 with 9.72% and the lowest in the
year 2009-10 with 3.4%. In NIL it is the highest in the year 2010-11 with 12.84% and the lowest
in the year 2015-16 with 6.64%. In DIL it is the highest in the year 2016-17 with 18.59% and the
lowest in the year 2011-12 with 12.2%. In ML it is the highest in the year 2016-17 with 17.31%
and the lowest in the year 2008-09 with 10. 7.40%. In GCPL it is the highest in the year 2011-12
with 19.49% and the lowest in the year 2013-14 with 13.13%.
In GCHL it is the highest in the year 2015-16 with 15.06% and the lowest in the year
2008-09 with 11.08%. In CPIL it is the highest in the year 2009-10 with 20.91% and the lowest
in the year 2016-17 with 12.77%. In P & G it is the highest in the year 2008-09 with 23.09% and
H0 = u1 = u2
H1 = u1 ≠ u2
significance). Hence, FC > FT The calculated value of ‘F’ is more than the table value. The Null
difference in means score net profit ratio in selected units during the study period.
ANOVA test analysis of net profit :
5% Limit
Source of
Variance
Table)
Between
930.751 9 103.417
Sample
Within 2.0849 1.985
450.663 90 5.007
Sample
1381.414 99 108.427
EARNING PER SHARE :
In order to avoid confusion on account of the varied meanings of the term capital
Employed the overall profitability can also be judge by calculating earning per share with the
help of the following formula.
Profit after tax - Preference Share Dividend

EPS =
No. of Equity Shares
The earning per share has in determining the market price at the equity shares of the
company. A comparison of earning per share of the company with another will also help in
deciding whether the equity share capital is being effectively used or not. It also helps in
estimating the company’s capacity to pay dividend to its equity share holders.
A higher EPS means better capital productivity. EPS is one of the most important ratio
which measure the net profit earned per share. EPS is one of the measure factors affecting the
dividend policy of the firm and the market prices of the company. A steady growth in EPS year
after year indicates a good track of profitability.EPS is computed by dividing the net profit after
tax and dividend to preference shareholders by the total number of shares outstanding. This
avoids confusion and indicates the profit available to the ordinary shareholders on a “per share
basis”.
Earning Per Share of selected units (percentage) :
2007-08 8.38 8.01 79.95 42.92 3.67 2.35 6.56 38.68 17.04 40.48
2008-09 8.81 11.47 75.51 55.39 4.32 2.33 6.29 47.78 21.34 55.10
2009-10 10.92 9.64 48.77 67.94 4.99 3.86 8.05 55.35 31.12 55.38
2010-11 6.48 10.68 12.16 84.91 2.71 5.13 13.44 71.30 29.60 46.48
2011-12 8.00 12.45 15.63 99.73 2.66 5.47 17.76 84.46 32.83 55.85
2012-13 9.39 17.56 19.56 110.7 3.39 6.65 15.01 103.9 36.53 62.61
2013-14 11.18 17.88 30.83 115.9 3.85 8.95 16.59 160.4 39.70 93.04
2014-15 12.06 19.95 51.89 122.9 4.34 8.45 19.23 138.8 41.10 106.6
2015-16 11.61 19.15 63.61 58.42 5.33 5.36 21.22 163.4 21.37 130.7
2016-17 8.47 20.79 70.31 96.09 5.67 6.53 24.90 156.2 21.23 133.3
Avg. 9.53 14.76 46.82 85.49 4.09 5.51 14.91 102.03 29.19 77.95
Min. 6.48 8.01 12.16 42.92 2.66 2.33 6.29 38.68 17.04 40.48
Max 12.06 20.79 79.95 122.9 5.67 8.95 24.9 163.4 41.1 133.3
ANALYSIS :
The above table and chart shows the earning per share of selected units during the study
period of 2007-08 to 2016-17. It shows the mixed trend during the study period in all the selected
units. The average earning per share was the highest in GCHL with 102.03 and it was the lowest
in DIL with 4.09 during the study period. The Minimum earning per share was the highest in NIL
with 42.92 and it was the lowest again in ML with 2.33during the study period. The maximum
earning per share was the highest in GCHL with 163.4 and it was the lowest in DIL with 5.67
during the study period. In ITC it is the highest in the year 2014-15 with 12.06 and the lowest in
the year 2010-11 with 6.48.
In HUL it is the highest in the year 2016-17 with 20.79 and the lowest in the year 2007-
08 with 8.01. In BIL it is the highest in the year 2007-08 with 79.95 and the lowest in the year
2010-11 with 12.16. In NIL it is the highest in the year 2014-15 with 122.9 and the lowest in the
year 2007-08 with 42.92. In DIL it is the highest in the year 2016-17 with 5.67 and the lowest in
the year 2011-12 with 2.66. In ML it is the highest in the year 2013-14 with 8.95 and the lowest
in the year 2008-09 with 2.33. In GCPL it is the highest in the year 2016-17 with 24.9 and the
lowest in the year 2008-09 with 6.29.
In GCHL it is the highest in the year 2015-16 with 163.4 and the lowest in the year 2007-
08 with 38.68. In CPIL it is the highest in the year 2014-15 with 41.1 and the lowest in the year
2007-08 with 17.04.
H0 = u1 = u2
H1 = u1 ≠ u2
significance). Hence, FC > FT. The calculated value of ‘F’ is more than the table value. The Null
difference in means score earning per share in selected units during the study period.
ANOVA test analysis of Earning Per Share
5% Limit
Source of
Variance
Table)
Between
121855.64 9 13539.51
Sample
Within 2.37 1.985
47196.78 90 524.41
Sample
169052.42 99 14063.92
DIVIDEND PER SHARE :
Dividend per share (DPS) is the total dividend declared for every common share
outstanding. Just like, we find earning per share (EPS) because per share data provides a better
idea of company’s profitability. Similarly, dividend per share (DPS) provides an idea of how
much dividend an investor is going to get on a per share basis.
Dividend per share is an important and widely-used shareholder ratio. A key focus of
shareholders is their return on investment. The returns from investing in shares of a company
come in two main forms:
The payment of dividends out of profits
The increase in the value of the shares (share price) compared with the price that the
shareholder originally paid for the shares
One very straightforward shareholder ratio (though as we shall see – not a hugely helpful
one) is dividend per share. This shows the value of the total dividend per issued share for the
financial year.
It can be calculate with following formula:
Dividend Per Share : Dividends

No. of shares
You can calculate the dividend per share by dividing the dividends with the number of
common shares outstanding for a given fiscal year. If your purpose is to know the amount of
dividend then this formula should be used.
Dividends : It only includes interim dividend to be distributed to common shareholders

for a specific fiscal year. Preference dividend and special dividend are not be included here.
Number of Common Shares Outstanding: It includes the no. of common shares outstanding as on
the particular date. The Company makes the list of shareholders entitled to receive dividends on
the record date. Number of outstanding shares as on that date is taken into the denominator.
Weighted average number of common shares outstanding: Changes in the no. of shares
outstanding during the year are ignored in the first formula. In the second formula, No. of
common shares outstanding is taken and weights are given to them based on the time they have
remained outstanding during the fiscal year. Then, the weighted average is found out to take into
consideration the changes in shares outstanding during the year.
ADVANTAGES OF USING DIVIDEND PER SHARE RATIO
Comparability
DPS provides a better comparability between two companies as it is on per share basis. You
should not compare the absolute amount dividends as it might lead to an unreliable conclusion
due to differences in the nature of companies.
DPS trends as signals for markets
Increasing the level of dps is considered to be a positive signal as it shows that company has
more confidence in its future earnings. Similarly, reducing that level would send a negative
signal. In this scenario, you should always go through dividend
Used in valuation model
DPS is used in many valuation models (i.e. Dividend discount model) due to its predictability. It
is one of the most useful ratios in valuing and analyzing the company’s stock.
Using DPS as a metric provides more comparability and reliable interpretation rather than the
absolute dividend. Please note that you should cross check the method with which DPS is
calculated. Using any DPS statistics blindly might lead to a faulty analysis.
DPS is considered to be a positive sign for the financial strength of the company. However, DPS
is affected by many factors like Company’s dividend policy, reinvestment opportunities
available, size, industry, life cycle stage etc. Hence, it should be used with caution and along
with other metrics to conclude about the financial strength of the company.
Dividend Per Share of selected units (`)
2007-08 3.50 9.00 18.00 33.00 1.50 0.66 4.00 12.00 13.00 20.00
2008-09 3.70 7.50 4.00 42.50 1.75 0.66 4.00 15.00 15.00 22.50
2009-10 10.00 6.50 25.00 48.50 2.00 0.66 4.25 18.00 20.00 22.50
2010-11 4.45 6.50 6.50 48.50 1.15 0.66 4.50 50.00 22.00 22.50
2011-12 4.50 7.50 8.50 48.50 1.30 0.70 4.75 35.00 25.00 22.50
2012-13 5.25 18.50 8.50 48.50 1.50 1.00 5.00 45.00 28.00 25.00
2013-14 6.00 13.00 12.00 48.50 1.75 3.50 5.25 45.00 27.00 27.50
2014-15 6.25 15.00 16.00 63.00 2.00 2.50 5.50 55.00 24.00 30.25
2015-16 8.50 16.00 20.00 48.50 2.25 4.25 5.75 70.00 10.00 36.00
2016-17 4.75 17.00 22.00 63.00 2.25 3.50 15.00 70.00 10.00 389.0
Avg. 5.69 11.65 14.05 49.25 1.75 1.81 5.80 41.50 19.40 61.78
Min. 3.50 6.50 4.00 33.00 1.15 0.66 4.00 12.00 10.00 20.00
Max 10.0 18.50 25.00 63.00 2.25 4.25 15.00 70.00 28.00 389.0
ANALYSIS :
The above table No. 4.4 and chart shows the dividend per share of selected units during
the study period of 2007-08 to 2016-17. It shows the mixed trend during the study period in all
the selected units except P & G. In P & G it shows the increasing trend during the study period.
The average dividend per share was the highest in P & G with 61.78 and it was the lowest in DIL
with 1.75 during the study period. The Minimum dividend per share was the highest in NIL with
33.00 and it was the lowest again in ML with 0.66 during the study period. The maximum
dividend per share was the highest in P & G with 389.0 and it was the lowest in DIL with 2.25
during the study period.
In ITC it is the highest in the year 2009-10 with 10.0 and the lowest in the year 2007-08
with 3.50. In HUL it is the highest in the year 2012-13 with 18.50 and the lowest in the year
2010-11 with 6.50. In BIL it is the highest in the year 2009-10 with 25.00 and the lowest in the
year 2008-09 with 4.00. In NIL it is the highest in the year 2014-15 with 63.00 and the lowest in
the year 2007-08 with 33.00. In DIL it is the highest in the year 2015 & 16 and 2016-17 with
2.25 and the lowest in the year 2010-11 with 1.15. In ML it is the highest in the year 2014-15
with 4.25 and the lowest in the year 2007-08 to 2010-11 with 0.66.
In GCPL it is the highest in the year 2016-17 with 15.00 and the lowest in the year 2007-
08 and 2008-09 with 4.00. lowest in the year 2007-08 with 12.00. In CPIL it is the highest in the
year 2012-13 with 28.00 and the lowest in the year 2015-16 with 10.00. In P & G it is the highest
in the year 2016-17 with 389.0 and the lowest in the year 2007-08 with 20.00.
HYPOTHESIS TESTING:
H0 = u1 = u2
H1 = u1 ≠ u2
The calculated value of F is 3.373 and table value of F is 1.985 (at 5% level of significance).
Hence, FC > FT The calculated value of ‘F’ is more than the table value. The Null Hypothesis is
rejected. The results are not as per the expectation i.e. There is significance difference in means
score dividend per share in selected units during the study period.
ANOVA test analysis of dividend per share
5% Limit
Source of
Variance
Table)
Between
42229.71 9 4692.19
Sample
Within 3.373 1.985
125188.23 90 1390.98
Sample
167417.94 99 6083.17
DIVIDEND PAYOUT RATIO:
The purpose of this ratio is to find out the proportion of earning used for payment of
dividend and the proportion of earning retained. The ratio is a relationship between earning per
equity share and dividend per equity share.
The ratio can be calculated as follows :
Dividend per equity share

Earning per equity share
OR
This calculation will give you the overall dividend ratio. Both the total dividends and the
net income of the company will be reported on the financial statements.
You can also calculate the dividend payout ratio on a share basis by dividing the
dividends per share by the earnings per share.Obviously, this calculation requires a little more
work because you must figure out the earnings per share as well as divide the dividends by each
outstanding share. Both of these formulas will arrive at the same answer however.
The dividend payout ratio measures the percentage of net income that is distributed to
shareholders in the form of dividends during the year. In other words, this ratio shows the portion
of profits the company decides to keep to fund operations and the portion of profits that is given
to its shareholders. Investors are particularly interested in the dividend payout ratio because they
want to know if companies are paying out a reasonable portion of net income to investors. For
instance, most start up companies and tech companies rarely give dividends at all.
Conversely, some companies want to spur investors’ interest so much that they are
willing to pay out unreasonably high dividend percentages. Inventors can see that these dividend
rates can’t be sustained very long because the company will eventually need money for its
operations.
Since investors want to see a steady stream of sustainable dividends from a company, the
dividend payout ratio analysis is important. A consistent trend in this ratio is usually more
important than a high or low ratio. Since it is for companies to declare dividends and increase
their ratio for one year, a single high ratio does not mean that much. Investors are mainly
concerned with sustainable trends. For instance, investors can assume that a company that has a
payout ratio of 20 percent for the last ten years will continue giving 20 percent of its profit to the
shareholders.
Conversely, a company that has a downward trend of payouts is alarming to investors.

For example, if a company’s ratio has fallen a percentage each year for the last five years might
indicate that the company can no longer afford to pay such high dividends. This could be an
indication of poor operating performance. Generally, more mature and stable companies tend to
have a higher ratio than newer start up companies.
Higher ratio signifies that the company has utilized larger portion of this earning for
payment of dividend to equity shareholders. It shows that lesser amount of earning has been
retained. Lower ratio indicates that smaller portion of earning has been utilized for payment of
dividend and larger portion has been retained. It shows stronger financial position of a company.
It indicates brighter chances of future growth and expansion and greater possibility of
appreciation in the value of shares.
Dividend Payout Ratio of selected units (%)
2007-08 41.77 112.43 22.51 76.89 40.91 27.82 60.99 31.02 76.30 49.40
2008-09 42.01 65.38 52.97 76.72 40.53 28.07 63.62 33.50 70.29 40.84
2009-10 91.60 6.44 51.26 71.39 40.04 17.11 52.79 32.52 64.26 40.63
2010-11 68.62 60.87 53.44 57.12 42.46 12.86 33.48 70.13 74.32 48.41
2011-12 56.22 60.23 54.37 48.63 48.89 12.79 26.74 41.44 76.15 40.29
2012-13 55.92 105.37 43.45 43.79 44.24 15.03 33.30 43.33 76.65 39.93
2013-14 53.67 72.70 38.92 41.86 45.40 39.10 31.64 28.05 68.01 29.56
2014-15 51.84 75.20 30.83 51.27 46.07 29.58 28.61 39.63 58.39 28.37
2015-16 73.20 83.54 31.44 83.02 42.23 79.32 27.09 42.83 46.80 27.66
2016-17 56.08 81.78 31.29 65.56 39.70 53.60 60.25 44.83 47.10 291.8
Avg. 59.09 72.39 41.05 61.63 43.05 31.53 41.85 40.73 65.83 63.69
Min. 41.77 6.44 22.51 41.86 39.70 12.79 26.74 28.05 46.8 27.66
Max 91.6 112.43 54.37 83.02 48.89 79.32 63.62 70.13 76.65 291.8
ANALYSIS :
The above table No. 4.9 and chart shows the dividend payout ratio of selected units
during the study period of 2007-08 to 2016-17. It shows the fluctuated trend during the study
period in all the selected units. The average dividend payout ratio was the highest in P & G with
72.39% and it was the lowest in ML with 31.53% during the study period. The Minimum
dividend payout ratio was the highest in CPIL with 46.8% and it was the lowest again in HUL
with 6.44% during the study period.
The maximum dividend payout ratio was the highest in P & G with 291.8% and it was
the lowest in DIL with 48.89% during the study period. In ITC it is the highest in the year 2009-
10 with 91.6% and the lowest in the year 2007-08 with 41.77%. In HUL it is the highest in the
year 2007-08 with 112.43% and the lowest in the year 2009-10 with 6.44%. In BIL it is the
highest in the year 2011-12 with 54.37% and the lowest in the year 2007-08 with 22.51%. In NIL
it is the highest in the year 2015-16 with 83.02% and the lowest in the year 2013-14 with
41.86%. In DIL it is the highest in the year 2011-12 with 48.89% and the lowest in the year
2016-17 with 39.70%. In ML it is the highest in the year 2015-16 with 79.32% and the lowest in
the year 2011-12 with 12.79%.
In GCPL it is the highest in the year 2008-09 with 63.62% and the lowest in the year
2011-12 with 26.74%. In GCHL it is the highest in the year 2010-11 with 70.13% and the lowest
in the year 2013-14 with 28.05%. In CPIL it is the highest in the year 2012-13 with 76.65% and
the lowest in the year 2015-16 with 46.8%. In P & G it is the highest in the year 2016-17 with
291.8% and the lowest in the year 2015-16 with 27.66%.
HYPOTHESIS TESTING:
H0 = u1 = u2
H1 = u1 ≠ u2
score ret in selected dividend payout units during the study period.
ANOVA test analysis of dividend payout ratio
5% Limit
Source of
Variance
Table)
Between
17358.81 9 1928.75
Sample
Within 2.169 1.985
80001.63 90 888.91
Sample
97360.44 99 2817.66
RETURN ON ASSETS RATIO :
“The term ‘Investments’ represents the assets which are actively used in the business firm
for generating sales and profits. These assets can be defined as operating assets.”3 The amount of
investment is computed by subtracting the total amount of unused assets from the combined total
net fixed assets after deducting depreciation and current assets.
While calculating the amount of “Investment” following items are excluded.
Non business assets :- The Investment made outside business in the form of shares and
debentures are not included in calculating the “Investment”.
Fictitious assets :- The expenses and losses which have not yet been written off are term as
fictitious assets. These assets are excluded while calculating the “Investment”.
Idle assets :- The assets which does not make any contribution towards the earnings of the
company are known as idle assets e.g. capital working progress, obsolete assets etc. These assets
are not taken into consideration as ROI is a test of efficiency.
Intangible assets: - These assets consist of patent, copyright, trademark, goodwill etc. These
assets should be written off at the earliest. Such assets are not included in computing investment.
ROI ratio judges the overall performance of the concern. It measures how efficiently the
sources of the business are being used. In other words, it tells what is the earning capacity of the
net assets of the business. Higher the ratio the more efficient is the management and utilization of
capital employed.
In the present study for computing the return on investments operation profits before interest and
tax has been taken as profit.
Further, income from investment on outside business and non-trading activities are excluded
from it. ROI is calculated on the basis of the following formula:
Operating Profit
Return on Investment = (Before interest and taxes) x100
Investment
Return on Assets Ratio of selected units (%)

2007-08 19.14 25.78 17.78 31.82 32.79 22.12 28.97 11.95 34.25 20.17
2008-09 17.71 34.64 14.55 34.43 27.85 18.05 22.38 11.67 40.65 25.39
2009-10 19.15 24.62 8.98 35.11 26.31 23.31 24.07 12.52 43.08 20.19
2010-11 20.19 24.25 10.36 35.64 22.71 20.53 24.76 13.54 30.18 13.20
2011-12 22.39 26.01 11.84 27.63 17.65 15.84 20.47 13.08 28.72 13.68
2012-13 23.15 34.43 13.94 22.33 19.70 15.53 12.38 15.99 27.15 14.99
2013-14 24.02 32.04 20.97 19.47 19.61 16.80 11.40 18.42 24.53 21.99
2014-15 22.50 32.85 29.05 19.53 18.96 14.27 11.83 11.04 21.56 20.10
2015-16 19.45 30.43 27.67 9.46 19.87 18.39 12.01 11.15 19.02 20.60
2016-17 19.47 31.68 24.94 14.37 17.80 22.31 12.40 11.50 16.03 26.30
Avg. 20.72 29.67 18.01 24.98 22.33 18.72 18.07 13.09 28.52 19.66
Min. 17.71 24.25 8.98 9.46 17.65 14.27 11.4 11.04 16.03 13.2
Max 24.02 34.64 29.05 35.64 32.79 23.31 28.97 18.42 43.08 26.3
ANALYSIS :
The above table No. 4.5 and chart shows the return on assets ratio of selected units during
the study period of 2007-08 to 2016-17. It shows the mixed trend during the study period in all
the selected units. The average return on assets ratio was the highest in HUL with 29.67 % and it
was the lowest in GCHL with 13.09% during the study period. The Minimum return on assets
ratio was the highest in HUL with 24.25% and it was the lowest again in ML with 8.98% during
the study period. The maximum return on assets ratio was the highest in CPIL with 43.08% and
it was the lowest in GCHL with 18.42% during the study period.
In ITC it is the highest in the year 2014-15 with 24.02% and the lowest in the year 2008-
09 with 17.71%. In HUL it is the highest in the year 2012-13 with 34.64% and the lowest in the
year 2010-11 with 24.25%. In BIL it is the highest in the year 2014-15 with 29.05% and the
lowest in the year 2009-10 with 8.98%. In NIL it is the highest in the year 2010-11 with 35.64%
and the lowest in the year 2015-16 with 9.46%. In DIL it is the highest in the year 2007-08 with
32.79% and the lowest in the year 2011-12 with 17.65%. In ML it is the highest in the year 2009-
10 with 23.31% and the lowest in the year 2014-15 with 14.27%.
HYPOTHESIS TESTING:
H0 = u1 = u2
H1 = u1 ≠ u2

score ret in selected return on assets units during the study period.
ANOVA test analysis of return on assets
5% Limit
Source of
Variance
Table)
Between
2351.89 9 261.32
Sample
Within 3121.51 90 34.683 3.802 1.985
Sample
5473.40 99 295.003
RETURN ON GROSS CAPITAL EMPLOYED :
The return on capital employed or return on investment (ROI) is a very useful technique
to measure the profitability of all financial resources employed in the business enterprises assets.
ROI reveals a vital indication of the profitability in terms of employment of capital in the
business. In other words this ratio measure the earning power profit output with the capital input.
“This rate is the end profit of a series of quantitative variables representing different
interconnected and interdependent factor’s of business operations.” ROI is computed by
multiplying profit margin ratio and assets turn over ratio. ROI is totally free from all the
weakness that contained as assets turn over ignores the profitability of the business on sales
while profit margin does not consider the utilization of the assets of the business. Thus, ROI
represent the relationship between net profit and assets of the business.
Return on gross capital employed ratio provides a test of profitability related to the
sources of long term funds. It indicates the relationship of the effectiveness of management of
the business firm. It also reveals the overall efficiency of the industry working. In other words
this ratio will indicate the earning capacity. This ratio will be helpful in inter-firm comparison
within the same industry. The term gross capital employed means the total of fixed assets and the
current assets employed in the business. The return on gross capital employed has been
computed by dividing the profit before interest and taxes by the gross capital employed. The
return on gross capital employed shows that, to what extent management have employed all the
resources, which is provided by owner’s and creditor’s to earn appreciable profit for the business
firm.
Return on Gross Capital Employed Ratio of selected units (%)
2007-08 27.96 84.00 28.90 102.52 75.97 61.85 114.58 27.36 104.67 41.21
2008-09 25.65 143.31 23.57 119.78 63.03 43.86 47.20 26.77 153.35 45.47
2009-10 29.69 90.0 19.51 124.22 60.44 50.05 36.37 27.95 156.07 36.89
2010-11 32.93 88.52 34.28 113.97 57.72 43.66 36.84 32.15 113.38 26.58
2011-12 35.38 88.14 38.45 90.31 45.31 33.71 29.80 33.76 108.97 27.94
2012-13 35.67 124.25 40.28 69.52 44.87 27.55 19.35 34.87 107.41 27.05
2013-14 36.42 131.80 49.34 53.62 40.68 29.12 19.56 42.52 99.11 33.41
2014-15 33.21 124.81 56.36 45.51 37.22 25.28 20.47 29.73 81.59 31.02
2015-16 25.95 83.43 46.93 19.92 35.45 28.38 20.21 27.99 64.94 29.37
2016-17 24.27 70.73 36.76 31.78 30.38 30.93 20.78 22.18 50.48 39.95
Avg. 30.71 102.90 37.44 77.12 49.11 37.44 36.52 30.53 103.99 33.89
Min. 24.27 70.73 19.51 19.92 30.38 25.28 19.35 22.18 50.48 26.58
Max 36.42 143.31 56.36 124.22 75.97 61.85 114.58 42.52 156.07 45.47
ANALYSIS :
The above table No. 4.6 and chart shows the return on gross capital employed ratio of
selected units during the study period of 2007-08 to 2016-17. It shows the fluctuated trend during
the study period in all the selected units. The average return on gross capital employed ratio was
the highest in CPIL with 103.99% and it was the lowest in GCHL with 30.53% during the study
period. The Minimum return on gross capital employed ratio was the highest in HUL with
70.73% and it was the lowest again in GCPL with 19.35% during the study period. The
maximum return on gross capital employed ratio was the highest in CPIL with 156.07% and it
was the lowest in ITC with 36.42% during the study period.
lowest in the year 2009-10 with 19.51%. In NIL it is the highest in the year 2009-10 with
124.22% and the lowest in the year 2015-16 with 19.92%. In DIL it is the highest in the year
2007-08 with 75.97% and the lowest in the year 2016-17 with 30.38%. In ML it is the highest in
the year 2007-08 with 61.85% and the lowest in the year 2014-15 with 25.28%.
In GCPL it is the highest in the year 2007-08 with 114.58% and thelowest in the year
HYPOTHESIS TESTING:
H0 = u1 = u2
H1 = u1 ≠ u2
score ret in selected return on gross capital employed units during the study period.
RETURN ON NET CAPITAL EMPLOYED:
This ratio explains the relationship between total profits earned by the business and total
investments made or total assets employed. This ratio, thus measures the overall efficiency of the
business operations. Return on capital employed ratio provides a test of profitability related to
the sources of long term funds. It indicates the relationship of the effectiveness of management
of the business firm. It also reveals the overall efficiency of the industry working. In other words
this ratio will indicate the earning capacity. This ratio will be helpful in inter-firm comparison
within the same industry.
This ratio is alternatively known as Return on Total Resources.
Calculation: Return on total resources is calculated by dividing Net Profit Before preference
dividend and interest on loans and debentures by total assets (fixed or current). This is always
expressed in percentage.
Return on net capital employed
Net profit before tax, interest and preference dividend

= x100
Capital Employed
(Composition: The elements considered for calculating this ratio are : Net profit before tax and
interest & Net Capital employed )
Net profit: Net profit for the purpose of computing this ratio will be net profit before taxes,
interest on secured and unsecured loans and dividend on preference shares. Interest on short-term
borrowing will be deducted while calculating operating profit. Non-trading income such as
interest on Government Securities or non-trading losses or expenses will be excluded.
But, certain analyst considers net operating profit while computing this ratio. Operating profit
and the method of calculating operating profit is explained in first ratio.
Alternatively, the ratio can be calculated as under:

Net Operating Profit ×100
Capital Employed
Net operating profit will be the profit before taxes, depreciation, finance and interest
charges and other non-operating losses and non-operating incomes. Total operating assets before
depreciation is taken as the denominator in that case.
Capital Employed: Total resources are also known as ‘Total capital employed’ and
sometimes as ‘Gross capital employed’ or ‘Total assets before depreciation’.
Thus, total capital consists of all assets fixed and current. In other words, the total of the
assets side of the balance sheet is considered as the total assets employed.
But, care has to be taken to exclude fictitious assets like those items under the heat
‘Miscellaneous Expenditure’, in case they appear on the assets side of the balance sheet. This is
the ‘asset side approach’ of arriving at the total capital of the business.
According to liability side approach, capital employed is arrived at as under: Equity share
capital + Preference share capital + Undistributed profits + Reserves and surplus – Fictitious
Assets + Long term Borrowings
OR
Proprietor’s Funds + Long term Loans
OR
Fixed Assets + Current Assets – Current Liabilities
While calculating capital employed on the basis of assets, following points must be
noted:
Any asset which is not in use should be excluded.
• Intangible assets like goodwill, patents, trademarks etc. should be excluded. If they have
some potential sales value, they should be included.
• Investments which are not concerned with business should be excluded.
• Fictitious assets are to be excluded.
While calculating net profit, following points must be noted:
• If some assets have been excluded from capital employed, interest or dividend received
on such assets should also be excluded.
• Interest on long term loans should be added to reported net profit as long term loans are
considered as part of capital employed.
• Abnormal gains and losses are excluded from reported profit.

• Net profit should be before tax because the top management has no control over external
factors like taxation.
SIGNIFICANCE :
This ratio is a clear index of the earning capacity of the business and shows the optimum
utilization of the assets or resources employed, i.e. return on capital employed including long-
term borrowings.
This ratio indicates the degree of managerial efficiency and is an effective tool in the
measurement of overall efficiency of the business.
When this ratio is compared with similar ratios of other periods and of other companies,
useful information’s can be obtained for determining the future course of action.
This ratio indicates the productivity of capital utilized or employed. It is the measures of
operating efficiency of the business.
Capital budgeting decisions are made on the analysis of this ratio.
PRECAUTIONS :
Certain analysts use net profit (after taxes and finance expenses) and total assets
(including fictitious assets) as components of this ratio.
Therefore, while comparing the return on capital employed of other firms, it is essential
to make one self sure that the components of the ratios compared are same and consistent.
Return on Net Capital Employed Ratio of selected units (%)

2007-08 40.72 100.49 33.78 152.33 80.24 41.22 71.00 42.00 129.95 56.63
2008-09 37.84 152.15 29.91 173.13 62.66 31.70 44.16 41.37 178.62 58.89
2009-10 44.22 107.16 15.64 174.16 62.58 38.28 42.07 42.96 176.30 47.94
2010-11 48.52 112.07 27.60 159.56 57.05 34.21 41.85 48.73 145.93 31.14
2011-12 51.52 112.47 31.62 89.87 42.92 27.39 33.98 51.68 143.96 34.38
2012-13 51.64 161.12 40.80 62.01 46.14 26.56 22.32 51.98 143.35 38.10
2013-14 52.65 170.24 63.83 53.52 46.97 28.49 23.60 64.09 133.63 51.51
2014-15 48.72 177.25 84.24 55.76 44.72 29.05 24.90 45.33 113.91 45.40
2015-16 39.96 119.18 70.64 28.70 43.20 35.53 26.99 42.98 92.74 44.56
2016-17 36.02 100.52 54.46 49.13 36.79 39.99 27.44 34.10 73.88 62.65
Avg. 45.18 131.27 45.25 99.82 52.33 33.24 35.83 46.52 133.23 47.12
Min. 36.02 100.49 15.64 28.70 36.79 26.56 22.32 34.10 73.88 31.14
Max 52.65 177.25 84.24 174.16 80.24 41.22 71.00 64.09 178.62 62.65
ANALYSIS :
The above table and chart shows the return on net capital employed ratio of selected units
during the study period of 2007-08 to 2016-17. It shows the fluctuated trend during the study
period in all the selected units. The average return on capital employed ratio was the highest in
CPIL with 133.23% and it was the lowest in ML with 33.24% during the study period. The
Minimum return on capital employed ratio was the highest in HUL with 100.49% and it was the
lowest again in BIL with 15.64% during the study period. The maximum return on capital
employed ratio was the highest in CPIL with 178.62% and it was the lowest in ML with 41.22%
during the study period. In ITC it is the highest in the year 2013-14 with 52.65% and the lowest
in the year 2016-17 with 36.02%.
In HUL it is the highest in the year 2014-15 with 177.25% and the lowest in the year
2007-08 with 100.49%. In BIL it is the highest in the year 2014-15 with 84.24% and the lowest
in the year 2009-10 with 15.64%. In NIL it is the highest in the year 2009-10 with 174.16% and
the lowest in the year 2015-16 with 28.70%. In DIL it is the highest in the year 2007-08 with
08 with 41.22% and the lowest in the year 2012-13 with 26.56%. In GCPL it is the highest in the
year 2007-08 with 71.00% and the lowest in the year 2012-13 with 22.32%.
In GCHL it is the highest in the year 2013-14 with 64.09% and the lowest in the year
2016-17 with 34.10%. In CPIL it is the highest in the year 2008-09 with 178.62% and the lowest
in the year 2016-17 with 73.88%. In P & G it is the highest in the year 2016-17 with 62.65% and
HYPOTHESIS TESTING:
H0 = u1 = u2
H1 = u1 ≠ u2
significance). Hence, FC > FT The calculated value of ‘F’ is more than the table value. The Null
difference in means score ret in selected return on capital employed units during the study
period.
CASH PROFIT MARGIN RATIO:
Cash profit is the profit recorded by a business that uses the cash basis of accounting.
Under this method, revenues are based on cash receipts and expenses are based on cash
payments. Consequently, cash profit is the net change in cash from these receipts and payments
during a reporting period.
Some analysts use "earnings before interest, tax, depreciation and amortisation" (EBITDA) to
sales ratio, called cash profit margin, to measure operating performance. They prefer to use
EBITDA margin because they believe that it focuses on cash operating items. Cash profit is the
profit recorded by a business that uses the cash basis of accounting. Under this method, revenues
are based on cash receipts and expenses are based on cash payments. Consequently, cash profit is
the net change in cash from these receipts and payments during a reporting period.
Cash profit does not include other types of cash receipts and payments than those
involved with the sale of goods or services. Thus, a cash receipt from the sale of a fixed asset or
of company shares or bonds is not considered a cash receipt to be included in the calculation of
cash profit.
The cash profit concept closely relates to the net change in cash flows that an
organization experiences during a reporting period. The difference between the change in total
cash flows and the cash profit is that the cash profit only relates (as just noted) to the sale of
goods or services.
A company using the accrual basis of accounting will likely not record the same amount
of profit as would be derived from the cash profit calculation. This is because the accrual basis
records revenue based on goods or services provided, and records expenses based on
consumption, irrespective of any changes in cash flow.
Thus, the timing of revenue recognition is accelerated under the accrual basis of
accounting if goods or services are sold on credit, while a cash basis organization will wait to
recognize the revenue until customers have paid in cash. The timing of expense recognition is
accelerated under the accrual basis if suppliers issue goods or services to the buyer on credit, so
that cash payments are delayed.
In short, the differences between the accrual basis and cash basis of accounting make it
quite likely that the net profit figure will be different from the cash profit figure reported by an
entity.
Cash Profit Margin Ratio of selected units (%)
2007-08 16.37 12.79 8.41 13.40 16.17 10.33 17.84 14.77 16.20 21.92
2008-09 16.17 12.45 6.80 14.01 16.54 8.29 15.56 13.54 17.81 24.95
2009-10 17.57 12.55 4.50 14.67 16.16 12.85 20.23 13.57 22.76 22.38
2010-11 17.87 12.24 4.46 14.84 15.37 14.54 17.91 13.97 18.33 16.64
2011-12 19.12 12.55 4.65 14.48 13.22 12.41 20.33 13.78 17.32 16.06
2012-13 19.51 17.78 5.10 15.69 14.55 13.52 14.34 14.04 16.26 13.81
2013-14 20.08 13.96 6.74 15.47 14.74 16.65 13.96 14.33 15.58 16.31
2014-15 20.30 14.06 10.07 15.04 15.05 12.86 14.80 14.25 14.96 16.89
2015-16 19.20 13.31 10.69 11.07 18.63 15.47 15.72 16.32 15.92 20.18
2016-17 19.79 14.17 10.83 13.52 20.00 18.62 17.78 16.30 15.72 20.36
Avg. 18.59 13.59 7.23 14.219 16.04 13.55 16.85 14.49 17.09 18.95
Min. 16.17 12.24 4.46 11.07 13.22 8.29 13.96 13.54 14.96 13.81
Max 20.30 17.78 10.83 15.69 20.00 18.62 20.33 16.32 22.76 24.95
ANALYSIS :
The above table and chart shows the cash profit margin ratio of selected units during the
study period of 2007-08 to 2016-17. It shows the fluctuated trend during the study period in all
the selected units. The average cash profit margin ratio was the highest in P & G with 18.95%
and it was the lowest in BIL with 7.23% during the study period. The Minimum cash profit
margin ratio was the highest in ITC with 16.17% and it was the lowest again in BIL with 4.46%
during the study period. The maximum cash profit margin ratio was the highest in P & G with
24.95% and it was the lowest in BIL with 10.83% during the study period.
lowest in the year 2010-11 with 4.46%. In NIL it is the highest in the year 2012-13 with 15.69%
and the lowest in the year 2015-16 with 11.07%. In DIL it is the highest in the year 2016-17 with
17 with 18.62% and the lowest in the year 2008-09 with 8.29%.
HYPOTHESIS TESTING:
For the testing of hypothesis ANOVA test has been applied as under
H0 = u1 = u2
H1 = u1 ≠ u2
score ret in selected cash profit margin units during the study period.
ANOVA test analysis of cash profit margin
5% Limit
Source of
Variance
Table)
Between
1027.77 9 114.19
Sample
Within 22.675 1.985
453.26 90 5.04
Sample
1481.03 99 119.23
LIQUIDITY, EFFICIENCY AND LEVERAGE ANALYSIS RATIOS :
Cash does not enter in to the profit and loss account at an enterprise; hence cash in
neither profit nor loss. Bit without cash, profit (loss) remains meaningless for an
enterprise/owners. Profit is a liability, and like any other liability it is nominal in nature, cash is
the real thing which an enterprise manager learns the hardware in day-to-day payment at
obligations. Firm cannot manage to pay a suppliers bill or salaries and wages by simply making
profit, he needs cash to do it. Firm also cannot pay dividend to the shareholders except thought
cash alone.
A firm’s ability to pay its debts can be measure partly through the use of liquidity ratio.
Short term liquidity involves the relationship between current assets and current liabilities.
Through the liquidity ratio can be examined whether the organization is liquid enough to meet its
current liabilities. Corporate liquidity encompasses the quantum of current/liquid assets their
structure, the circular flow of these assets and technical solvency in the sense of measuring the
extent of current/liquid assets as cover over short-term obligations.
Liquidity ratio is calculated to determine the short-term solvency of the business. It is

extremely essential for a firm to be able to meet its obligations as they become due. Liquidity
ratios measure the ability of the firm to meet its current obligation. In fact analysis of liquidity
needs the preparation of cash budgets and cash and fund flow statements but liquidity ratios, by
establishing a relationship between cash and other current assets to current obligations, provide a
quick measure of liquidity. A firm should ensure that it does not suffer from lack of liquidity and
also that it does not have excess liquidity. The failure of a company to met its obligation due to
lack of sufficient liquidity , will result in a poor credit worthiness, loss of creditors confidence or
even in legal tangles resulting in the closure of the business unit. A very high degree of liquidity
is also bad; idle assets earn nothing. The firm’s funds will be unnecessarily tied up in current
assets. Therefore it is necessary to strike a proper balance between high liquidity and lack of
liquidity.
Following ratios have been selected by the researcher for the study of liquidity, efficiency and
leverage :
1. Current Ratio
2. Quick Ratio
3. Interest Coverage Ratio

4. Inventory Turnover Ratio
5. Debtors Ratio
6. Creditor Ratio
7. Assets Turnover Ratio
8. Fixed Assets Turnover Ratio
9. Working Capital Turnover Ratio
10. Fixed Capital to Sales Ratio
CURRENT RATIO :
Current ratio is also known as Solvency Ratio’ or ‘2 to 1 ratio’. This ratio is an indication
of the firm’s commitment to meet its short-term liabilities. Current ratio is a ratio of the firm’s
total current assets and its total current liabilities. Current assets include inventory, sundry
debtors, cash and bank, loan and advances. Current liability includes creditors, bills payable,
accrued expenses, tax liability but not short term bank loans and other loans. This ratio expresses
the relationship between current assets and current liabilities.
A low ratio indicates that a firm may not be able to pay its future obligations in time,
particularly if condition change causing a slowdown in cash collection. A high ratio may indicate
an excessive amount of current assets and management’s failure to utilize the firm’s resources
properly.
The current ratio is calculated by dividing the current assets by current liabilities. This
can be expressed as pure number or percentage ratio. Generally, it is expressed as a pure ratio.
Current Assets
Current Ratio
Current Liabilities
Working capital is the difference between current assets and current liabilities. Working
capital is defined as the ‘net current assets.’ Working capital = Current assets less current
liabilities. Since, current ratio indicated the working capital position of the business, it is also
known as the ‘Working Capital Ratio.’
Components:
Current assets include,
➢ Inventories of raw materials, finished goods, work – in process and stores and spares.
➢ Sundry debtors.
➢ Short term loans, deposits and advances.

➢ Cash on hand and at bank.
➢ Prepaid expenses and accrued incomes.
➢ Bills receivable.
➢ Marketable investments and short – term securities, etc.
Current assets are those assets which are converted into cash within one accounting period i.e.,
within two balance sheet dates.
Current liabilities include,
➢ Sundry creditors.
➢ Bills payable
➢ Outstanding expenses
➢ Unclaimed dividend
➢ Interest accrued but not due on secured and unsecured loans.
➢ Advances received
➢ Incomes received in advance.
➢ Provision for taxation.
➢ Proposed dividends.
➢ Installments of loan secured/ unsecured payable within 12 months.
Current liabilities are those liabilities which will be paid within one accounting period.
Current assets are further classified into:
i. Liquid assets and
ii. Deferred assets
Current assets like stock on inventories and prepaid expenses are deferred assets and other
current assets are considered to be liquid assets. Advance against purchase of goods and services
are a current asset. However, advance against purchase of fixed assets is not a current asset as it
is a long term commitment of funds in capital expenditure.
Deposits for adjustment of on going transactions are current assets. Deposits with excise,
customs, port trust are current assets. Deposits as security for supply of gas, electricity, water
should not be treated as current assets as they are not expected to be converted into cash.
Similarly, current liabilities are further classified into (a) liquid liabilities and (b) deferred
liabilities.
Current liabilities like bank overdraft and incomes received in advance are regarded as
deferred liabilities and the rest of the current liabilities are termed as liquid liabilities.
Bank overdraft – a current liability or not: It is generally thought that bank overdraft, being a
permanent arrangement with the banker, is not to be considered as a current liability. But, in
views of the convention of conservatism and the fact that the banker may cancel this facility at
any time it is advisable to consider bank overdraft as a current liability.
Standard current ratio: Generally, the ratio of 2 : 1 is considered satisfactory. But this does not
mean that if the ratio is lower, the business is in financial difficulty. The ratio changes throughout
the year, depending upon the nature of transactions. If stock turns over quickly, realization from
debtors is quick, period of credit to debtors is short, the working capital needed may be less as in
the case of service industries like hotels, public utilities, etc., as compared to other industries
where the collection from debtors and stock – turnover are slow. In case of a business enterprise
engaged in seasonal activities, the current ratio might be low at certain times and high at other
times, as money may be locked up in inventories (particularly in industries using agricultural
products as raw materials as they have to be bought when available in plenty).
Therefore, one cannot conclude always that a current ratio lower than 2 : 1 is not good or
not satisfactory; it depends upon the nature of business activities and circumstances. Generally, 2
: 1 ratio could be taken to be satisfactory. Current ratio changes due to the composition and
character of the current assets and current liabilities, and the nature of business. A high current
ratio may not mean better liquidity, if the level of stocks is high compared to other items of
current assets, the current ratio will be high but liquidity will be poor. The current ratio may be
low but the liquidity may still be good.
LIMITATIONS OF CURRENT RATIO:
Current ratio is regarded by many as crude test of liquidity as it does not take into
account the liquidity of each individual current asset. During periods of prosperity, the ratio may
fall because of increase in debtors and stock and decrease in cash.
Current Ratio of selected units

2007-08 2.07 0.83 2.11 0.76 1.30 1.97 0.95 1.52 0.75 1.57
2008-09 2.13 0.97 2.02 0.70 1.30 2.55 2.26 1.55 0.98 2.23
2009-10 1.62 0.97 1.58 0.75 1.34 2.78 1.66 1.62 1.04 1.60
2010-11 1.59 1.05 1.54 0.72 1.51 1.29 0.74 1.41 1.08 2.19
2011-12 1.70 1.21 0.88 0.88 1.45 1.43 1.20 1.75 1.05 1.93
2012-13 1.70 0.99 0.71 1.31 1.56 1.67 1.14 1.85 1.01 1.91
2013-14 1.90 1.04 0.90 1.71 1.52 1.26 0.72 1.92 0.90 2.02
2014-15 2.10 1.05 1.19 1.45 1.20 1.51 0.89 1.96 0.91 1.90
2015-16 3.73 1.43 1.35 1.68 1.39 1.71 1.09 2.58 0.91 3.19
2016-17 3.69 1.30 1.84 2.01 1.31 2.16 1.04 2.59 0.93 0.96
Avg. 2.22 1.08 1.41 1.19 1.39 1.83 1.17 1.88 0.96 1.95
Min. 1.59 0.83 0.71 0.7 1.2 1.26 0.72 1.41 0.75 0.96
Max 3.73 1.43 2.11 2.01 1.56 2.78 2.26 2.59 1.08 3.19
ANALYSIS :
The above table No. 4.10 and chart shows the current ratio of selected units during the
the selected units. The average current ratio was the highest in ITC with 2.22 : 1 and it was the
lowest in CPIL with 0.96 : 1 during the study period. The Minimum current ratio was the highest
in ITC with 1.59 : 1 and it was the lowest again in NIL with 0.7 : 1 during the study period. The
maximum current ratio was the highest in ITC with 3.73 : 1 and it was the lowest in CPIL with
1.08 : 1 during the study period. In ITC it is the highest in the year 2015-16 with 3.73 : 1 and the
lowest in the year 2010-11 with 1.59 : 1.
In HUL it is the highest in the year 2015-16 with 1.43 : 1 and the lowest in the year 2007-
08 with 0.83 : 1. In BIL it is the highest in the year 2007-08 with 2.11 : 1 and the lowest in the
year 2012-13 with 0.71 : 1. In NIL it is the highest in the year 2016-17 with 2.01 : 1 and the
lowest in the year 2008-09 with 0.7 : 1. In DIL it is the highest in the year 2012-13 with 1.56 : 1
and the lowest in the year 2014-15 with 1.2 : 1. In ML it is the highest in the year 2009-10 with
2.78 : 1 and the lowest in the year 2013-14 with 1.26 : 1. In GCPL it is the highest in the year
2008-09 with 2.26 : 1 and the lowest in the year 2013-14 with 0.72 : 1. In GCHL it is the highest
in the year 2016-17 with 2.59 : 1 and the lowest in the year 2010-11 with 1.41 :
In CPIL it is the highest in the year 2010-11 with 1.08 : 1 and the lowest in the year 2007-08 with
0.75 : 1. In P & G it is the highest in the year 2015-16 with 3.19 : 1 and the lowest in the year
2016-17 with 0.96 : 1.
HYPOTHESIS TESTING:
H0 = u1 = u2
H1 = u1 ≠ u2
score ret in selected current ratio units during the study period.
ANOVA test analysis of current ratio
5% Limit
Source of
Variance
Table)
Between
16.666 9 1.851
Sample
Within 8.472 1.985
19.670 90 0.218
Sample
36.336 99 2.069
.
QUICK RATIO :
Quick Ratio is also known as ‘Liquid Ratio’ or ‘quick assets ratio’ or ‘acid test ratio’ or
‘near – money ratio’, or ‘1 to 1 ratio’. This ratio is designed to indicate the liquid financial
position of an enterprise. Thus, the ratio shows the firm’s ability to meet its immediate
obligations promptly. It ensures the relationship between quick assets and quick liabilities.
The quick ratio or liquid ratio is calculated by dividing quick assets by quick liabilities.
This is generally expressed as a pure,
Quick Assets
Quick Ratio = Quick Liabilities
This is also known as acid – test ratio as there are possibilities of becoming ‘cash–
insolvent’ in a very short time, if major part of the current assets is locked in inventories.
Sometimes, to make a conservative measurement of the liquid position of a firm, the ratio may
be calculated as follows:
Quick Assets
Quick Ratio = Current Liabilities
COMPONENTS :
Quick assets and quick liabilities are the two elements of the ratio. As we have already
seen in the discussion of current assets and current liabilities quick assets and quick liabilities are
part of current assets and current liabilities respectively.
Quick Assets are those current assets which can be realized immediately, at short notice
without much difficulty or undue losses. Quick assets mean all current assets with the exception
of inventories. Quick liabilities are those current liabilities which are fluctuating and fall due for
payment at any time during the year. Quick liabilities mean all current liabilities with exception
of bank overdraft. Thus,
Quick assets = Current assets less closing stock Current liabilities

less bank overdraft
Quick liabilities =
66
The purpose of liquid ratio is to measure the immediate solvency of the business and
indicate the availability of liquid cash to meet its immediate commitments. The liquid ratio
assumes significance in the analysis of financial statements owing to the following factors :
It indicates the immediate solvency of the business enterprise. Short – term creditors
study liquid ratio along with the current ratio of a firm to understand its solvency position very
well. Unlike the current ratio, liquid ratio is more of a qualitative concept.
This ratio is the true test of business solvency and will indicate the inventory hold – ups
when studies along with the current ratio. For example: If two firms have same current ratio but
different liquidity ratios, it clearly indicates over – investment in inventories by the firm having a
low liquid ratio. As this ratio eliminates inventories, it is a rigorous test of liquidity. This ratio is
more important for financial institutions.
STANDARD LIQUID RATIO :
As a rule of thumb, 1 : 1 is considered as the standard ratio. If a firm has equal quick
assets for immediate liabilities, it is considered to be in a fairly good solvency position. 1 : 1 as
the standard for this ratio is more than justified owing to the following factors :
Though inventories are not considered as quick assets, they can be used to a certain
extent to meet the quick liabilities. Besides, the inventories may be sold at profit and thus liquid
position may improve.
Apart from these factors, the interpretation of liquid ratio is influenced by the same
factors as in the case of current ratio. The standard liquid ratio varies from season to season in a
company, and enterprise to enterprise in an industry.
PRECAUTIONS IN APPLICATION :
Analysis by liquid ratio requires all the precautionary steps mentioned under current ratio
– proper valuation of assets; proper study of the respective asset items, etc.
The following additional precautions should be taken for a cautions approach :
➢ Too much reliance on quick ratio without detailed investigation should be avoided. This
is because of fact that quick ratio depends much on certain factors like the seasonal
nature of business. During slack seasons, the ratio tends to be lower and a higher ratio is
possible during periods of heavy selling.
➢ Possibility of window – dressing is not over – ruled and hence suitable caution should be
exercised in the study and analysis of this ratio.
LIMITATIONS:
➢ The liquid ratio, when not considered along with current ratio, may not provide useful
information.
➢ It is just a variation of the current ratio and hence it suffers from all the shortcomings of
current ratio analysis.
67
➢ Liquid ratio alone may not indicate the solvency and liquidity positions of the business.
There are several other factors which may influence the solvency and liquidity positions
of a business enterprise.
Quick Ratio of selected units

2007-08 1.14 0.45 1.25 0.35 0.95 1.08 0.35 1.28 0.61 1.45
2008-09 1.16 0.53 1.42 0.34 0.91 1.34 1.79 1.27 0.63 2.00
2009-10 1.01 0.65 1.06 0.39 1.00 1.49 1.17 1.38 0.92 1.51
2010-11 0.93 0.63 0.92 0.37 1.01 0.67 0.34 1.20 0.93 1.96
2011-12 1.01 0.82 0.49 0.38 0.99 0.85 0.65 1.38 0.87 1.72
2012-13 1.06 0.66 0.41 0.65 1.16 0.78 0.63 1.51 0.88 1.64
2013-14 1.21 0.72 0.52 1.23 1.13 0.81 0.38 1.64 0.77 1.78
2014-15 1.40 0.76 0.91 0.83 0.87 0.95 0.57 1.68 0.78 1.73
2015-16 2.36 1.05 1.00 1.13 1.01 1.01 0.59 2.26 0.75 2.94
2016-17 2.46 0.98 1.30 1.14 0.99 1.12 0.67 2.30 0.77 0.68
Avg. 1.37 0.73 0.93 0.68 1.00 1.01 0.71 1.59 0.79 1.74
Min. 0.93 0.45 0.41 0.34 0.87 0.67 0.34 1.2 0.61 0.68
Max 2.46 1.05 1.42 1.23 1.16 1.49 1.79 2.3 0.93 2.94
68
ANALYSIS :
The above table No. 4.11 and chart shows the quick ratio of selected units during the
the selected units. The average quick ratio was the highest in P & G with 1.74 : 1 and it was the
lowest in NIL with 0.68 : 1 during the study period. The Minimum quick ratio was the highest in
ITC with 0.93 : 1 and it was the lowest in NIL and GCPL with 0.34 : 1 during the study period.
The maximum quick ratio was the highest in P & G with 2.94 : 1 and it was the lowest in CPIL
with 0.93 : 1 during the study period. In ITC it is the highest in the year 2016-17 with 2.46 : 1
and the lowest in the year 2010-11 with 0.93 : 1.
In HUL it is the highest in the year 2015-16 with 1.05 : 1 and the lowest in the year 2007-
08 with 0.45 : 1. In BIL it is the highest in the year 2008-09 with 1.42 : 1 and the lowest in the
year 2012-13 with 0.41 : 1. In NIL it is the highest in the year 2013-14 with 1.23 : 1 and the
lowest in the year 2008-09 with 0.34 : 1. In DIL it is the highest in the year 2012-13 with 1.16 : 1
and the lowest in the year 2014-15 with 0.87 : 1. In ML it is the highest in the year 2009-10 with
1.49 : 1 and the lowest in the year 2010-11 with 0.67 : 1. In GCPL it is the highest in the year
2008-09 with 1.79 : 1 and the lowest in the year 2010-11 with 0.34 : 1.
In GCHL it is the highest in the year 2016-17 with 2.30 : 1 and the lowest in the year
2010-11 with 1.20 : 1. In CPIL it is the highest in the year 2010-11 with 0.93 : 1 and the lowest
in the year 2007-08 with 0.61 : 1. In P & G it is the highest in the year 2015-16 with 2.94 : 1 and
the lowest in the year 2016-17 with 0.68 : 1.
HYPOTHESIS TESTING:
H0 = u1 = u2
H1 = u1 ≠ u2
score ret in selected quick ratio units during the study period.
69
ANOVA test analysis of quick ratio
5% Limit
Source of
Variance
Table)
Between
13.142 9 1.460
Sample
Within 10.655 1.985
12.334 90 0.137
Sample
25.476 99 1.597
INTEREST COVERAGE RATIO :
This ratio is also called as debt service ratio. The interest coverage ratio is used to
determine how easily a company can pay their interest expenses on outstanding debt. The
purpose of this ratio is to find out the number of times the fixed financial charges are covered by
income before interest and tax.
The interest coverage ratio is a financial ratio that measures a company’s ability to make
interest payments on its debt in a timely manner. Unlike the debt service coverage ratio, this
liquidity ratio really has nothing to do with being able to make principle payments on the debt
itself. Instead, it calculates the firm’s ability to afford the interest on the debt.
Creditors and investors use this computation to understand the profitability and risk of a
company. For instance, an investor is mainly concerned about seeing his investment in the
company increase in value. A large part of this appreciation is based on profits and operational
efficiencies. Thus, investors want to see that their company can pay its bills on time without
having to sacrifice its operations and profits.
A creditor, on the other hand, uses the interest coverage ratio to identify whether a
company is able to support additional debt. If a company can’t afford to pay the interest on its
debt, it certainly won’t be able to afford to pay the principle payments. Thus, creditors use this
formula to calculate the risk involved in lending.
The ratio is calculated by the following formula:
= Net profit before interest and tax

Fixed Interest charges
As you can see, the equation uses EBIT instead of net income. Earnings before interest
and taxes is essentially net income with the interest and tax expenses added back in. The reason
we use EBIT instead of net income in the calculation is
Because we want a true representation of how much the company can afford to pay in
interest. If we used net income, the calculation would be screwed because interest expense would
be counted twice and tax expense would change based on the interest being deducted. To avoid
70
this problem, we just use the earnings or revenues before interest and taxes are paid.
You might also want to note that this formula can be used to measure any interest period.
For example, monthly or partial year numbers can be calculated by dividing the EBIT and
interest expense by the number of months you want to compute.
It is very important from the lender’s point of view. It indicates whether the comp[any
will earn sufficient profits to pay periodically the interest charges. Higher ratio is favourable. It
shows that the company will be able to pay interest regularly.
Interest Coverage Ratio of selected units

2007-08 114.37 85.18 24.87 736.65 37.55 9.77 17.30 54.16 204.50 7442.0
2008-09 101.56 120.48 15.53 471.38 30.37 6.91 22.07 54.52 314.89 00.00
2009-10 69.04 388.83 15.72 656.69 40.07 16.99 82.68 88.83 323.28 9316.9
2010-11 82.10 0.000 6.25 1066.7 50.69 12.85 63.14 174.66 323.71 6799.8
2011-12 90.85 2798.6 7.63 272.61 42.63 15.09 45.76 158.86 389.94 7435.0
2012-13 101.88 198.13 9.80 59.37 41.74 13.41 36.32 268.69 00.00 00.00
2013-14 448.43 140.56 100.75 46.96 45.51 24.57 18.74 966.57 00.00 86.40
2014-15 158.89 368.86 730.43 125.69 99.74 44.08 22.40 1201.1 00.00 88.55
2015-16 191.08 397.40 920.30 248.30 118.87 59.67 18.34 464.16 00.00 102.36
2016-17 327.75 291.73 934.70 411.70 80.75 88.96 31.71 364.69 00.00 65.47
Avg. 168.59 478.98 276.59 409.61 58.79 29.23 35.85 379.62 155.63 3133.6
Min. 69.04 0 6.25 46.96 30.37 6.91 17.3 54.16 0 0
Max 448.43 2798.6 934.7 1066.7 118.87 88.96 82.68 1201.1 389.94 9316.9
71
ANALYSIS :
The above table No. 4.12 and chart shows the interest coverage ratio of selected units
during the study period of 2007-08 to 2016-17. It shows the high fluctuated trend during the
study period in all the selected units. The average interest coverage ratio was the highest in P &
G with 3133.6 times and it was the lowest in ML with 29.23 times during the study period. The
Minimum interest coverage ratio was the highest in ITC with 69.04 times and it was the lowest
in HUL, CPIL and P & G with 0 times during the study period.
The maximum interest coverage ratio was the highest in P & G with 9316.9 times and it
was the lowest in ML with 88.96 times during the study period. In ITC it is the highest in the
year 2013-14 with 448.43 times and the lowest in the year 2009-10 with 69.04 times. In HUL it
is the highest in the year 2011-12 with 2798.6 times and the lowest in the year 2010-11 with 0
times. In BIL it is the highest in the year 2016-17 with 934.7 times and the lowest in the year
2010-11 with 06.25 times. In NIL it is the highest in the year 2010-11 with 1066.7 times and the
lowest in the year 2013-14 with 46.96 times. In DIL it is the highest in the year 2015-16 with
118.87 times and the lowest in the year 2008-09 with 30.37 times. In ML it is the highest in the
year 2016-17 with 88.96 times and the lowest in the year 2008-09 with 6.91 times.
In GCPL it is the highest in the year 2009-10 with 82.68 times and the lowest in the year
2007-08 with 17.3 times. In GCHL it is the highest in the year 2014-15 with 1201.1 times and
the lowest in the year 2007-08 with 54.16 times. In CPIL it is the highest in the year 2011-12
with 389.94 times and the lowest during the year 2012-13 to 2016-17 with 0 times. In P & G it is
the highest in the year 2009-10 with 9316.9 times and the lowest in the year 2008-09 and 2012-
13 with 0 times.
HYPOTHESIS TESTING:
H0 = u1 = u2
H1 = u1 ≠ u2
score ret in selected interest coverage ratio units during the study period.
72
ANOVA test analysis of interest coverage ratio
5% Limit
Source of
Variance
Table)
Between
78676588.52 9 8741843.17
Sample
Within 5.043 1.985
156014433.52 90 1733493.71
Sample
234691022.04 99 10475336.88
INVENTORY TURNOVER RATIO :
Inventory Turnover Ratio is also known as “Inventory ratio” or “Stock turn over” or
“Merchandise turnover ratio” or “Stock Velocity ratio” or simply “Velocity of Stock”.
This ratio measures the number of times stock turns or flows or rotates in an accounting
period compared to the sales effected during that period.
The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period.
This measures how many times average inventory is “turned” or sold during a period. In
other words, it measures how many times a company sold its total average inventory during the
year.
In other words, the ratio indicates the frequency of inventory replacement i.e., the number
of times inventory has been sold and replaced during a given period of time.
Stock turnover ratio is the relationship between inventory and cost of goods sold and Is
calculated as under :
Cost of goods sold

Stock Turnover ratio = Average stock
Average stock on hand as at the end of a period is calculated by adding inventory in the
beginning of the period to the inventory at the close of the period and the product is divided by
two.
Average stock = Opening stock + closing stock
2
This ratio is important because total turnover depends on two main components of
performance. The first component is stock purchasing. If larger amounts of inventory are
purchased during the year, the company will have to sell greater amounts of inventory to
improve its turnover. If the company can’t sell these greater amounts of inventory, it will incur
storage costs and other holding costs.
73
The second component is sales. Sales have to match inventory purchases otherwise the
inventory will not turn effectively. That’s why the purchasing and sales departments must be in
tune with each other.
Inventory turnover is a measure of how efficiently a company can control its

merchandise, so it is important to have a high turn. This shows the company does not overspend
by buying too much inventory and wastes resources by storing non-salable inventory. It also
shows that the company can effectively sell the inventory it buys.
This measurement also shows investors how liquid a company’s inventory is. Think
about it. Inventory is one of the biggest assets a retailer reports on its balance sheet. If this
inventory can’t be sold, it is worthless to the company. This measurement shows how easily a
company can turn its inventory into cash.
Creditors are particularly interested in this because inventory is often put up as collateral
for loans. Banks want to know that this inventory will be easy to sell. Inventory turns vary with
industry. For instance, the apparel industry will have higher turns than the exotic car industry.
Inventory Turnover Ratio of selected units

2007-08 5.44 8.41 10.13 10.77 11.81 7.57 6.51 8.20 19.92 16.81
2008-09 5.38 9.66 11.32 10.69 10.47 7.80 7.75 7.21 22.25 15.41
2009-10 5.59 7.74 13.13 11.19 10.28 6.29 8.78 7.46 20.98 16.89
2010-11 5.96 8.27 14.69 11.87 8.73 5.71 10.76 8.41 18.04 17.36
2011-12 6.08 8.70 14.51 11.75 7.68 6.03 8.39 8.54 15.11 16.55
2012-13 6.46 10.82 15.97 11.64 8.55 5.50 7.82 9.10 16.50 16.09
2013-14 6.67 11.21 18.40 12.72 9.31 5.37 8.35 13.24 18.45 17.41
2014-15 6.31 12.23 20.61 12.88 9.93 6.44 9.57 10.37 17.73 19.87
2015-16 6.22 13.06 21.81 10.19 9.30 6.24 9.34 9.84 16.00 19.06
2016-17 6.57 14.11 17.60 10.83 8.84 5.26 9.11 9.58 15.48 15.87
Avg. 6.07 10.42 15.82 11.45 9.49 6.22 8.64 9.19 18.05 17.13
Min. 5.38 7.74 10.13 10.19 7.68 5.26 6.51 7.21 15.11 15.41
Max 6.67 14.11 21.81 12.88 11.81 7.8 10.76 13.24 22.25 19.87
ANALYSIS :
The above table and chart shows the inventory turnover ratio of selected units during the
the selected units. The average inventory turnover ratio was the highest in CPIL with 18.05 times
and it was the lowest in ITC with 6.07 times during the study period. The Minimum inventory
turnover ratio was the highest in P & G with 15.41 times and it was the lowest in ML with 5.26
times during the study period. The maximum inventory turnover ratio was the highest in CPIL
with 22.25 times and it was the lowest in ITC with 6.67 times during the study period.
74
In ITC it is the highest in the year 2013-14 with 6.67 times and the lowest in the year
2008-09 with 5.38 times. In HUL it is the highest in the year 2016-17 with 14.11 times and the
lowest in the year 2009-10 with 7.74 times. In BIL it is the highest in the year 2015-16 with
21.81 times and the lowest in the year 2007-08 with 10.13 times. In NIL it is the highest in the
year 2014-15 with 12.88 times and the lowest in the year 2015-16 with 10.19 times. In DIL it is
the highest in the year 2007-08 with 11.81 times and the lowest in the year 2011-12 with 7.68
times. In ML it is the highest in the year 2008-09 with 7.8 times and the lowest in the year 2016-
17 with 5.26 times. In GCPL it is the highest in the year 2010-11 with 10.76 times and the lowest
in the year 2007-08 with 6.51 times.
In GCHL it is the highest in the year 2013-14 with 13.24 times and the lowest in the year
2008-09 with 7.21 times. In CPIL it is the highest in the year 2008-09 with 22.25 times and the
lowest in the year 2011-12 with 15.11 times. In P & G it is the highest in the year 2014-15 with
19.87 times and the lowest in the year 2008-09 with 15.41 times.
75
CONCLUSIONS AND SUGGESTIONS
SUMMARY:
Brief summary of each chapter is as follows:
INTRODUCTION OF FMCG COMPANIES
The fast-moving consumer goods (FMCG) sector is an important contributor to India’s

GDP growth. The sector includes food & dairy products, packaged food products, household
products, drinks and others. FMCG is the fourth largest sector in Indian economy and provides
employment to around 3 million people accounting for approximately 5% of the total factory
employment in India. In this chapter overview of FMCG companies in India and company
profile of the selected units have been discussed.
In which concept of FMCG, Characteristics of FMCG, Overview of FMCG, FMCG

Scenario In India, Segments Of FMCG, FMCG Sector In India, Issues Of FMCG In India, The
Future Of F.M.C.G. - 2020, Top 10 Listed F.M.C.G. Companies, SWOT Analysis Of FMCG, The
FMCG Innovation Imperative, How Does FMCG Innovation Differ Between China And India?,
GST And FMCG, What The Millenniums Expect?, Road Ahead and Profile of ITC Ltd.,
Hindustan Unilever Ltd., Nestle India Ltd., Dabur India Ltd., Marico Ltd., Godrej Consumer
Products Ltd., Glaxosmithkline Consumer Healthcare Ltd., Colgate-Palmolive (India) Ltd.,
Procter & Gamble Hygiene & Health Care Ltd. have been discussed.
CONCEPTUAL FRAMEWORK OF FINANCIAL ANALYSIS
The analysis of the financial statements and interpretations of financial results of a

particular period of operations with the help of 'ratio' is termed as "ratio analysis." Ratio analysis
used to determine the financial soundness of a business concern. In this chapter Conceptual
Framework Of Financial Analysis have been discussed. In which Meaning And Definition Of
Financial Management, Evolution Of Financial Management, Scope Of Financial Management,
Interface Of Financial Management With Other Disciplines, Financial Decisions, Inter-Relation
Among Financial Decisions, Aims Of Finance Function, Goals Of Financial Management,
Financial Performance, Financial Efficiency, Efficiency And Performance, Objectives Of
Financial Performance, Areas Of Financial Performance Analysis, Introduction Of Financial
Statement Analysis, Scope Of Financial Statement Analysis.
The Need For Financial Statement Analysis, Importance Of Financial Performance

Analysis, Essential Features Of Financial Statement, Types Of Financial Performance Analysis,
Limitations Of Financial Statement Analysis, Concept Of Profit, Concept Of Profitability, Factor
Affecting The Profitability, The Du-Pont Chart, Objective Of Profitability Analysis, Techniques
Of Measuring Financial Performance – Ratio Analysis, Comparative Statement Analysis, Trend
Analysis, Statement Of Changes In Working Capital, Cash Flow Analysis, Fund Flow Analysis,
Value Added Statement have been discussed.
76
RESEARCH METHODOLOGY
Research in common parlance refers to a search for knowledge. Research simply put is an
endeavor to discover answers to problems through the application of scientific methods to the
knowable universe. The title of the present study is “Analysis of Financial Indicators of Selected
FMCG Companies of India.” The study covers top 10 FMCG companies of India during the
study period of 2007-08 to 2016-17. The study is based on secondary data collected & compiled
from the annual reports of the selected units and web site http://www.acekp.in and websites of
the selected units.
The main objectives of the study are to examine the profitability performance, liquidity
performance, efficiency analysis and leverage analysis. Statistical measures like average,
standard deviation and Anova Test have been used to test the validity of the hypothesis. Finally a
survey of existing study related literature on the subject has been shown along with the
limitations of the present study.
ANALYSIS OF FINANCIAL PERFORMANCE
Finance may be defined as the art and science of managing money. The major areas of
finance are financial services and managerial finance / corporate finance/ financial management.
While financial services is concerned with the design and delivery of advice and financial
products to individuals, businesses and governments within the areas of banking and related
institutions, personal financial planning, investments, real estate, insurance and so on, financial
management is concerned with the duties of the financial managers in the business firm.
Profit is the main goal for establishing a business concern. Profit is the primary
motivating force economic activity. Profit has to be earned and they have got to be earned on a
regular or continuous basis. Business concerns that are unable to generate sufficient profit from
their operations cannot remunerate the providers of their capital and this makes it difficult for
them to maintain the continuity of their existence. In this chapter, for the analysis of profitability,
liquidity, efficiency and leverage performance Operating Profit Ratio, Net Profit Ratio, Earning
Per Share, Dividend Per Share, Dividend Payout Ratio.The hypotheses have been tested with the
ANOVA test.
FINDINGS :
The main findings of the study are as under:
Operating Profit Ratio:
The average operating profit ratio was the highest in ITC with 24.68% and it was the
lowest in BIL with 8.81% during the study period. The Minimum operating profit ratio was the
highest in ITC with 20.66% and it was the lowest again in BIL with 3.76% during the study
period. The maximum operating profit ratio was the highest in P & G with 29.91% and it was the
lowest in BIL with 14.45% during the study period. It shows the fluctuated trend during the
study period in all the selected units. The performance of BIL was poor than other selected units
during the study period. The performance of ITC was sound than other selected units during the
study period. The result shown by ANOVA test reveals that the difference in operating profit
ratio is significant at 5% level of significance in the selected units, during the study period.
77
Net Profit Ratio :
The average net profit ratio was the highest in P & G with 16.83% and it was the lowest
in BIL with 6.12% during the study period. The Minimum ratio was the highest in ITC with
13.79% and it was the lowest again in BIL with 3.40% during the study period. The maximum
ratio was the highest in P & G with 23.09% and it was the lowest in BIL with 9.72% during the
study period. It shows the fluctuated trend during the study period in all the selected units. The
performance of BIL was poor than other selected units during the study period. The performance
of P & G was sound than other selected units during the study period. The result shown by
ANOVA test reveals that the difference in net profit ratio is significant at 5% level of
significance in the selected units, during the study period.
Earning Per Share :
The average Earning Per Share was the highest in GCHL with 102.03 and it was the
lowest in DIL with 4.09 during the study period. The Minimum earning per share was the highest
in NIL with 42.92 and it was the lowest again in ML with 2.33during the study period. The
maximum earning per share was the highest in GCHL with 163.4 and it was the lowest in DIL
with 5.67 during the study period. It shows the fluctuated trend during the study period in all the
selected units. The performance of DIL was poor than other selected units during the study
period. The performance of GCHL was sound than other selected units during the study period.
The result shown by ANOVA test reveals that the difference in Earning Per Share is significant
at 5% level of significance in the selected units, during the study period.
Dividend Per Share :
The average dividend per share was the highest in P & G with 61.78 and it was the lowest
in DIL with 1.75 during the study period. The Minimum dividend per share was the highest in
NIL with 33.00 and it was the lowest again in ML with 0.66 during the study period. The
maximum dividend per share was the highest in P & G with 389.0 and it was the lowest in DIL
with 2.25 during the study period. It shows the fluctuated trend during the study period in all the
selected units. The performance of ML was poor than other selected units during the study
period. The performance of P & G was sound than other selected units during the study period.
The result shown by ANOVA test reveals that the difference in dividend per share is significant
at 5% level of significance in the selected units, during the study period.
Dividend Payout Ratio :
The average dividend payout ratio was the highest in P & G with 72.39% and it was the
lowest in ML with 31.53% during the study period. The Minimum ratio was the highest in CPIL
with 46.8% and it was the lowest again in HUL with 6.44% during the study period. The
maximum ratio was the highest in P & G with 291.8% and it was the lowest in DIL with 48.89%
during the study period. It shows the fluctuated trend during the study period in all the selected
units. The performance of HUL was poor than other selected units during the study period. The
performance of P & G was sound than other selected units during the study period. The result
shown by ANOVA test reveals that the difference in dividend payout ratio is significant at 5%
level of significance in the selected units, during the study period.
Return On Assets Ratio :

78
The average return on assets ratio was the highest in HUL with 29.67 % and it was the
lowest in GCHL with 13.09% during the study period. The Minimum ratio was the highest in
HUL with 24.25% and it was the lowest again in ML with 8.98% during the study period. The
maximum ratio was the highest in CPIL with 43.08% and it was the lowest in GCHL with
18.42% during the study period. It shows the fluctuated trend during the study period in all the
selected units. The performance of ML was poor than other selected units during the study
period. The performance of CPIL was sound than other selected units during the study period.
The result shown by ANOVA test reveals that the difference in return on assets ratio is
significant at 5% level of significance in the selected units, during the study period.
Return on Gross Capital Employed :
The average return on gross capital employed ratio was the highest in CPIL with
103.99% and it was the lowest in GCHL with 30.53% during the study period. The Minimum
return on gross capital employed ratio was the highest in HUL with 70.73% and it was the lowest
again in GCPL with 19.35% during the study period. The maximum ratio was the highest in
CPIL with 156.07% and it was the lowest in ITC with 36.42% during the study period. It shows
the fluctuated trend during the study period in all the selected units. The performance of GCPL
was poor than other selected units during the study period. The performance of CPIL was sound
than other selected units during the study period. The result shown by ANOVA test reveals that
the difference in return on gross capital employed ratio is significant at 5% level of significance
in the selected units, during the study period.
Return on Net Capital Employed:
The average return on net capital employed ratio was the highest in CPIL with 133.23%
and it was the lowest in ML with 33.24% during the study period. The Minimum return on
capital employed ratio was the highest in HUL with 100.49% and it was the lowest again in BIL
with 15.64% during the study period. The maximum return on capital employed ratio was the
highest in CPIL with 178.62% and it was the lowest in ML with 41.22% during the study period.
It shows the fluctuated trend during the study period in all the selected units. The performance of
BIL was poor than other selected units during the study period. The performance of CPIL was
sound than other selected units during the study period. The result shown by ANOVA test reveals
that the difference in return on net capital employed ratio is significant at 5% level of
significance in the selected units, during the study period.
Cash Profit Margin Ratio:
The average cash profit margin ratio was the highest in P & G with 18.95% and it was the
lowest in BIL with 7.23% during the study period. The Minimum ratio was the highest in ITC
with 16.17% and it was the lowest again in BIL with 4.46% during the study period. The
maximum ratio was the highest in P & G with 24.95% and it was the lowest in BIL with 10.83%
during the study period. It shows the fluctuated trend during the study period in all the selected
units. The performance of BIL was poor than other selected units during the study period. The
shown by ANOVA test reveals that the difference in cash profit margin ratio is significant at 5%
Current Ratio:
79
The average current ratio was the highest in ITC with 2.22: 1 and it was the lowest in
CPIL with 0.96 : 1 during the study period. The Minimum current ratio was the highest in ITC
with 1.59 : 1 and it was the lowest again in NIL with 0.7 : 1 during the study period. The
maximum current ratio was the highest in ITC with 3.73 : 1 and it was the lowest in CPIL with
1.08 : 1 during the study period. It shows the fluctuated trend during the study period in all the
selected units. The performance of NIL was poor than other selected units during the study
period. The performance of ITC was sound than other selected units during the study period. The
result shown by ANOVA test reveals that the difference in current ratio is significant at 5% level
of significance in the selected units, during the study period.
Quick Ratio:
The average quick ratio was the highest in P & G with 1.74 : 1 and it was the lowest in
NIL with 0.68 : 1 during the study period. The Minimum quick ratio was the highest in ITC with
0.93 : 1 and it was the lowest in NIL and GCPL with 0.34 : 1 during the study period. The
maximum quick ratio was the highest in P & G with 2.94 : 1 and it was the lowest in CPIL with
0.93 : 1 during the study period. It shows the fluctuated trend during the study period in all the
selected units. The performance of NIL was poor than other selected units during the study
period. The performance of P & G was sound than other selected units during the study period.
The result shown by ANOVA test reveals that the difference in quick ratio is significant at 5%
Interest Coverage Ratio:
The average interest coverage ratio was the highest in P & G with 3133.6 times and it
was the lowest in ML with 29.23 times during the study period. The Minimum interest coverage
ratio was the highest in ITC with 69.04 times and it was the lowest in HUL, CPIL and P & G
with 0 times during the study period. The maximum interest coverage ratio was the highest in P
& G with 9316.9 times and it was the lowest in ML with 88.96 times during the study period. It
shows the high fluctuated trend during the study period in all the selected units. The performance
of HUL, CPIL and P & G was poor than other selected units during the study period. The
shown by ANOVA test reveals that the difference in interest coverage ratio is significant at 5%
a) The profitability performance regarding operating profit and net profit of BIL is very
poor as compare to other selected units during the study period.
b) The earning per share of NIL, GCHL and P & G is very much sound as compare to other
selected units during the study period.
c) The earning per share of DIL and ML is very much poor as compare to other selected
units during the study period.
d) The dividend per share of NIL, GCHL and P & G is very much sound as compare to
other selected units during the study period.
e) The dividend per share of DIL and ML is very much poor as compare to other selected
units during the study period.
80
f) HUL, NIL and CPIL are making sound return on capital employed as compare to other
selected units during the study period.
g) ML is earning more profit during the study period but paying less dividend as per strict
dividend policy as compare to other selected units during the study period.
h) The overall liquidity performance regarding of ITC, GCHL and P & G is very sound as
compare to other selected units during the study period.
i) P & G is very much sound to pay interest as compare to other selected units during the
study period.
SUGGESTIONS / RECOMMENDATIONS:
The suggestions / recommendations from the present study are as under:
➢ The profitability performance of BIL was very poor as compare to other selected units
during the study period, so BIL requires to minimize operating cost by using cost
reduction techniques.
➢ Operating profit of ITC and P & G was very high but net profit of ITC, GCHL and P & G
was less than other units. So, operating charges of ITC, GCHL and P & G were very
higher than other selected units during the study period so, this unit has required to
minimize operating charges by using management control system and cost control
system.
➢ Earning Per Share of ITC, DIL and ML was less but profit was sound. So these units
require to increase EPS.
➢ Dividend Per Share of DIL and ML was very poor. So these units require to implement
liberal dividend policy.
➢ The liquidity performance of HUL, NIL, GCPL and CPIL was very poor as compare to
other selected units during the study period. So, this unit should improve their working
capital by reducing its current liabilities or using liquidity management techniques.
➢ Current ratio of DIL is 1.39 : 1, while Liquid ratio is 1 : 1. So, DIL should increase their
current assets as compare to liquid assets by maintaining proper working capital in the
business.
➢ Working capital turnover ratio of ITC, ML, GCHL and P & G shows inefficient
utilization of working capital during the study period of 2007-08 to 2016-17, so these
units should try to proper use of the working capital for revenue generation.
➢ The working capital of selected units does not reflect any increasing trend, so these units
have to properly manage its current assets and current liabilities to maintain an increasing
trend of working capital.
➢ Credit policy of DIL, GCHL and P & G was very liberal as compare to other selected
units during the study period. These units have to maintain proper balance between strict
81
and liberal credit policy.
➢ The credit policy of BIL and NIL is very strict during the study period. These units have
to increase the credit facility for debtors.
➢ The ITC and ML should reduce their investments in inventory by using inventory control
techniques. These units are required to use the latest supply chain techniques like Just-in-
time, Efficient consumer response and quick response which focus on reducing the
inventory level and thereby reducing capital required the inventory.
➢ General suggestion for all selected units is that Growing internet connectivity, new
business models and increasing digital media has provided many companies an
opportunity to create their product awareness. This can be done by creating effective
supply chain, engaging in online retail partnerships. Creating a personalized E-commerce
portal, associating with horizontal E-commerce players or engaging with vertical E-
commerce specialists are the three commonly used approaches in E-commerce these
days.
➢ In order to maximize their volume sales and product penetration the companies need to
identify the most feasible sales channel route. Both national or multinational companies,
give importance to supply chain management system to enhance their business especially
in rural areas.
➢ Rising income levels, continuously growing demands has led to the development of new
FMCG products. This continuous demand for new innovative products has led to growth
in breakthrough innovation of FMCG products.
➢ To meet this demand, FMCG companies need to focus on R&D and innovation as a
means to grow the business. Strategies such as innovation in packaging, rebranding of
products, product innovation etc. are some of the innovation strategies should be adopted
by the companies to cater the demand market.
82
CONCLUSION
Fast moving consumer goods (FMCG) sector is an important contributor to the India’s
GDP growth. Currently, FMCG industry is the fourth largest sector in the Indian economy and
provides employment to around 3 million people. Over the years, India FMCG sector has been
growing at a healthy pace on account of growing disposable income, booming youth population
and increasing brand consciousness among consumers.
An increasing demand from the rural and tire population can be witnessed given the
increasing annual income and the awareness for the products and the increasing digitization
making them one of the major influencers of the FMCG sector. Given the fact that more than
66% of the population in India is rural it widens the scope for the FMCG segment digitally.
Globally, India is becoming one of the most attractive markets for foreign FMCG players due to
easy availability of imported raw materials and cheap labor costs. The urban segment is the
biggest contributor to the growth of India FMCG sector, accounting for around two-thirds of the
total revenues. However, the share of semi-urban and rural segments in the country’s FMCG
sector is anticipated to increase by the end of 2020.
General suggestion for all selected units is that Growing internet connectivity, new
business models and increasing digital media has provided many companies an opportunity to
create their product awareness. This can be done by creating effective supply chain, engaging in
online retail partnerships. Creating a personalized E-commerce portal, associating with
horizontal E-commerce players or engaging with vertical E-commerce specialists are the three
commonly used approaches in E-commerce these days.
In order to maximize their volume sales and product penetration the companies need to
identify the most feasible sales channel route. Both national or multinational companies, give
importance to supply chain management system to enhance their business especially in rural
areas.
Rising income levels, continuously growing demands has led to the development of new
FMCG products. This continuous demand for new innovative products has led to growth in
breakthrough innovation of FMCG products. To meet this demand, FMCG companies need to
focus on R&D and innovation as a means to grow the business. Strategies such as innovation in
packaging, rebranding of products, product innovation etc. are some of the innovation strategies
should be adopted by the companies to cater the demand market.
83
BIBLIOGRAPHY
1. Pani, P. (2017). Digitally savvy Indian consumers to drive consumption in

the next 10 years. Retrieved from http://www.thehindubusinessline.com/info-
tech/digitally-savvy-indian-consumers-to-drive-consumption-in-the-next-10-
years/ article9800072.ece
2. Pradip Kumar Krishnadevarajan, Deepak Muthukrishnan, S. Balasubramanian

and N. Kannan. Supply Chain in India “20112015” – A Review: Challenges,
Solution Framework and Key Best Practices, International Journal of
Management, 6(10), 2015, pp. 135-149.
3. Healthcare Industry in India. (2017) Retrieved

fromhttps://www.ibef.org/industry/healthcare-india.aspx
4 .KPMG Africa. (2016). Fast moving consumer good. Retrieved from

https://assets.kpmg.com/content/dam/kpmg/br/ pdf/2016/09/fast-moving-
consumer-goods.pdf
5. Absalom J. (2017) Supply Chain Innovation within the FMCG sector.

Retrieved from http://www.walter-james.com/insight/ supply-chain-
innovation-within-the-fmcg-sector/
6. Simchi-Levi D. Kaminsky, P. and Simchi-Levi E. Ravi Shankar, Designing

and Managing the supplychain Concepts,Startegies and case studies. New
York; Irwin McGraw Hill, Second Edition, 2008, pp12.
7. Supply chain challenges in the FMCG market. Retrieved

from,https://www.geodis.com/challenges-for-producers-of-fastmoving-
consumer-goods-@/en/view-3190-article.html/1993 .
8. Alicke K. and Losch M, McKinsey & Company.(2010). Lean and mean: How
does your supply chain shape up? Retrieved fromhttps://www.mckinsey.com/
9. Digital India to drive FMCG consumption worth $45-bn by 2020: Google

report. (2017). Retrieved from, http://www. business-
standard.com/article/economy-policy/digital-india-to-drive-fmcg-
consumption-worth-45-bn-by-2020-googlereport-117092700614_1.html
10. Abheek Singhi , Nimisha Jain and Kanika Sanghi. (2017). The New Indian:
The Many Facets of a Changing Consumer. Retrieved from,
https://www.bcg.com/en-in/publications/2017/marketing-sales-globalization-
new-indian-changing-consumer.aspx.
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“WORKING CAPITAL MANAGEMENT AND FMCG COMPANIES”

UNDER THE GUIDANCE OF

NAGRIK SHIKSHAN SANSTHA’S COLLEGE OF COMMERCE AND

UNDER THE GUIDANCE OF

NAGRIK SHIKSHAN SANSTHA’S COLLEGE OF COMMERCE AND

Nagrik Shikshan Sanstha’s College Of Commerce And Economics

‘B’ Wing, Nss Educational Complex, M. P. Mills Compound, Tardeo, Mumbai

Name and Signature of Guiding Teacher

Date of Submission : 25th October, 2018

NEHA MAHENDRA KOLI

DR. RAJ SOSHTE SIR

I would like to thank my Principal, Mrs. Chandra Purakayastha of Nagrik Shikshan

• Chapter No. 1 : Introduction to Working Capital

• Chapter No. 2 : FMCG Companies

• Chapter No. 3 : Literature Review

• Chapter No. 4 : Data Analysis, Interpretation and Presentation

• Chapter No. 5 : Research Methodology

• Chapter No. 6 : Hypothesis of the study

• Chapter No. 7 : Limitations

• Chapter No. 8 : Conclusions and Suggestions

• Chapter No. 9 : Abbreviations

• Chapter No. 10 : Bibliography

A firm is required to maintain a balance between liquidity and profitability while

Working capital management involves the relationship between a firm's short-term

Working capital management refers to a company's managerial accounting strategy

NATURE OF WORKING CAPITAL

The nature of working capital is as discussed below:

i. It is used for purchase of raw materials, payment of wages and expenses.

ii. It changes form constantly to keep the wheels of business moving.

operational efficiency of fixed assets.

IMPORTANCE OF WORKING CAPITAL

i. It helps measure profitability of an enterprise. In its absence, there would be neither

due to its high reputation or goodwill.

iv. Sufficient working capital helps maintain an uninterrupted flow of production by

supplying raw materials and payment of wages.

vi. It enhances liquidity, solvency, credit worthiness and reputation of enterprise.

enterprise run successfully during periods of crisis.

To analyse the impact of management of working capital on the profitability of firms in

SMOOTH WORKING CAPITAL OPERATING CYCLE

LOWEST WORKING CAPITAL

MINIMIZE RATE OF INTEREST OR COST OF CAPITAL

The cost of capital utilized on working capital should be minimized so as to achieve

CLASSIFICATION OF WORKING CAPITAL

Working capital may be of different types as follows:

(a) Gross Working Capital:

(b) Net Working Capital:

(c) Positive Working Capital:

(d) Negative Working Capital:

(e) Permanent Working Capital:

(f) Temporary or Variable Working Capital:

COMPONENTS OF WORKING CAPITAL

(a) Sundry Creditors

ELEMENTS OF WORKING CAPITAL MANAGEMENT

The final element of working capital management is inventory management. To operate

Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG) are

The fast-moving consumer goods (FMCG) sector is an important contributor to India’s

LIST OF TOP 5 FMCG COMPANIES IN INDIA

Literature review shows that researchers have conducted a number of studies in

HINDUSTAN UNILIVER LIMITED (HUL)

BALANCE SHEET - HINDUSTAN UNILEVER LTD.

Rs. (in Crores)

Particulars Mar'18 Mar'17 Mar'16 Mar'15 Mar'14

Share Capital 216.00 216.00 216.00 216.35 216.27