company owned factories and nine offices. QUALITATIVE ANALYSIS
1. BRAND VISIBILITY 2. DISTRIBUTION SYSTEM
3. SHARE OF WALLET 4. MARKET POSITION AND SHARE
1. CUT THROAT COMPETITION 2. PRICE OF
COMMODITIES 3. BUYER POWER 4. RISK FACTOR
1. RISK AND GOVERNANCE 2. BUSINESS INTEGRITY
3. CORPORATE GOVERNANCE 4. CSR Ratio Analysis • Liquidity Ratio
RATIO SIGNIFICANCE FORMULA VALUE INDUSTRY STANDARD
Current Ratio Ability of a company to pay off its Current Assets/ Current Liabilities 1.03 1.35 liabilities Quick Ratio an indicator of a company’s short- Current Assets – Inventories / 0.73 term liquidity position and measures Current Liabilities a company’s ability to meet its short- term obligations with its most liquid assets.
Current Ratio: HUL’s current ratio is almost at par with the industry standards. Thus, we can conclude that HUL has enough current assets to pay off its short term borrowing
Quick Ratio: ASSET MANAGEMENT RATIO RATIO SIGNIFICANCE FORMULA VALUE INDUSTRY STANDARD Inventory Rate at which company sells Net Sales/ Inventory 15.99 10.96 Turnover its products Ratio Fixed Assets Company’s return on its Net Sales/ Total Fixed Assets 6.81 4.01 Turnover investment in property, Ratio equipment, etc Inventory No. of days company holds its 365 days/ Inventory Turnover 22.83 29.26 Days Ratio inventory before selling it Ratio
Inventory Ratio: Company is selling goods very quickly and the demand for their products exists.
Fixed Assets Turnover Ratio: HUL has less money tied up in fixed assets for each unit of sales revenue Market Value Ratio • Earning per share : Earning allocated per share Ratio Significance Formula 2019 2018 Earning per Indicator of a company's profitability. (Net income - Preferred dividend)/ 29.94 24.25 share weighted average common share o/s • Inference – As there is increase in the EPS, it indicates that there has been increase in company’s earning power.
• Dividend per share: the sum of declared dividends issued by a company for every ordinary share outstanding Ratio Significance Formula 2019 2018 Dividend per An important metric to investors Sum of dividend declared for the 22 20 share because the amount a firm pays out in period/ dividends directly translates to income Ordinary shares o/s for the period for the shareholder
• Inference – As the ratio has increased than previous year, it suggests to investor that company is in healthy condition and can withstand current market conditions Debt Management Ratio • Return on asset ratio : Ratio Significance Formula value Industry standard Return on asset Measures how Net income/Total asset 35.07 40.62 effectively a company can earn a return on its investment in assets. Inference – As industry standard is greater than the value, HUL should focus on effective utilization of its assets
• Profit Margin: Ratio Significance Formula Value Industry Standard
Profit Margin The degree to which Net income/ Sales 23.74 22.71 a company or a business activity makes money. • Inference – As the calculated value is more than the industry standard, it indicates that company is performing fairly well • RETURN ON EQUITY • ROE is a profitability ratio that measures the ability of a firm to generate profit from its shareholder’s investments in the company. Ratio Significance Formula Value Industry Standard
Return on equity measures the ability of a firm to generate profits Net Income /Shareholder’s 82 47.23 from its shareholders investments in the company. Equity
• Inference- As the calculated value is higher than industry standard performance of the company is good
• RETURN ON CAPITAL EMPLOYED
• ROCE it is a financial ratio that determines a company’s profitability and the efficiency the capital is applied Ratio Significance Formula Value Industry Standard Return on capital Measures how efficiently a company can generate EBIT/Capital 94.87 53.56 employed profits from its capital employed by comparing net Employed operating profit to capital employed • Inference - As the calculated value is more than the industry standard, implies more economical use of capital Conclusion
FMCG sector will continue to see growth as the demand for these goods remains more or less constant , irrespective of recession or inflation
Overall performance of HUL is better compare to FMCG industry standard as
most of the ratios are on higher side
Higher asset management ratios indicates its efficient use of plants and equipment, whereas increase in market ratios indicates its increase in earning power and profits
Although its liquidity ratio are below industry average, they are within acceptable limit
