“

PROJECT ON RATIO ANALYSIS

FMCG

SUBMITTED BY: GROUP 9

JYOTI JANGID
KARUNESH
NANDINI KUMARI
TOSHIK SHRIMALI
SHREEYA VERMA
 Analysis of HUL’s Financial Condition from 2010-2019
-Jyoti Jangid
PGSF1916
1- Liquidity Ratio
This ratio explains the relationship between the current liabilities and current assets. It is
used to assess a firm’s ability to meet its short-term obligations.
Current Ratio and Quick Ratio are two ratios to check the Liquidity.

Current Ratio
2.00
1.80
1.60
1.40
1.20
Ratios

1.00
0.80
0.60
0.40
0.20
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Current Ratio 0.80 0.82 1.21 0.99 1.03 1.05 1.03 1.31 1.29 1.36
Benchmark 1.00 0.90 1.36 1.08 1.29 1.33 1.34 1.69 1.85 1.87
Years

Current Ratio Benchmark

Current Ratio

• HUL seems to be little fluctuated from the benchmark of industry

• The Current Ratio keeps on fluctuating, but every year it is below the benchmark.
• The current ratio is low in 2010, but picked up pace in 2012, after that it has
increased significantly.

Suggestions

• This also suggests that HUL needs to invest more in current assets to move closer to
the industry benchmark.
• Also, the company needs to maintain an optimum current ratio which is 2:1.

Quick Ratio
 Quick Ratio
1.80
1.60
1.40
1.20
1.00
ratio

0.80
0.60
0.40
0.20
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Quick Ratio 0.47 0.44 0.82 0.66 0.71 0.76 0.75 0.98 1.02 1.07
Benchmark 0.79 0.52 0.91 0.80 0.93 0.97 1.03 1.28 1.50 1.57
years

Quick Ratio Benchmark

• During these ten years HUL have maintained a quick ratio that is below the industry
benchmark.
• The quick ratio has increased over the years and the highest increase was during the
year 2019. After that the company have managed to increase its quick ratio
continuously.
• The quick ratio has increased over the years and is little deviated from the industrial
benchmark over the years.
• From the trend line it is very clear that from 2010-2019 there’s an overall increase in
HUL’s ability to pay off its short-term obligations
• HULs quick ratio is near to ideal ratio of 1:1, during the years 2017, 2018, 2019.

Suggestions

• This ratio is very useful for banks and financial institutions which provide short term
loans to companies
• HUL needs to maintain a quick ratio which is near to the industry bench mark.

2- Solvency Ratio
These ratios are calculated to assess the ability of a company to meet its long-term
obligations
It is also used to check how much money has been invested by investors and how much
money has been taken as debt by the company. This ratio measures the risk of investing in a
company.

Financial Liability to Equity Ratio

• HUL doesn’t have any long-term borrowings in the year 2010, but after that there
are some financial liabilities from the year 2015.
• HUL’s Financial Liability to Equity ratio can’t be compared to the industry benchmark
because the company is not using any long-term debts to finance its investments
and operations
 Financial liability to Equity Ratio
0.200
0.180
0.160
0.140
0.120
0.100
0.080
0.060
0.040
0.020
0.000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Financial liability to Equity
0.000 0.000 0.000 0.000 0.000 0.176 0.046 0.060 0.005 0.069
Ratio

• The Financial liability/Equity ratio shows how much money has been invested in the
business by Equity and how much financial liabilities have been taken for its
existence
• This means the company has used more equity and less financial liabilities for its
operations and functioning
• Till 2014 there were no financial liabilities for HUL, in 2015 it began to float
derivatives, and financial liabilities arrived. There has been an overall decrease in the
Financial Liability to Equity ratio for HUL.

Interest Coverage Ratio

Interest coverage ratio

35000.00
30000.00
25000.00
20000.00
15000.00
10000.00
5000.00
0.00
201 201 201 201 201 201 201 201 201 201
0 1 2 3 4 5 6 7 8 9
Interest Coverage Ratio 99.92 133.92 149.61 266.92 266.07 144.55 228.59 4876.6 30316. 1237.3
Benchmark 58.21 54.33 146.42 104.61 124.18 7404.8 2208.8 3030.0 9779.0 363.54

Interest Coverage Ratio Benchmark

• The Interest Coverage Ratio indicates how many times the interest charges are
covered by profits available to pay interest charges.
 • There is a steady increase in the interest coverage ratio in the years 2011 to 2014,
and a sudden increase in starting in 2017.
• HUL performed extraordinarily from 2017-2019 and exceeded Industry’s Benchmark
by many folds.
• There is an overall increase in HUL’s Interest Coverage Rate and a steady and slow
decrease in Industry’s Interest Coverage Ratio.

3- Turnover Ratio
This ratio indicates the proper use of resources provided to the business, or how well it coverts its
resources into profits.

Inventory turnover

Inventory turnover ratio

14.00

12.00

10.00

8.00

6.00

4.00

2.00

0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Inventory Turnover Ratio 4.50 5.01 5.93 6.97 6.98 7.84 7.20 7.87 8.35 8.81
Benchmark 9.74 7.92 9.96 10.83 11.48 11.69 11.63 10.44 10.48 10.74

Inventory Turnover Ratio Benchmark

• A higher Inventory Turnover Ratio indicates how quickly Inventory is sold.

• From 2010-2019 the Inventory turnover is increasing at a slow rate.
• HULs ITR is below the benchmark of the industry. HUL needs to sell its inventory faster to
meet the bench mark.
• Clearly in 2019 Inventory turnover is the highest
• Selling off inventory too soon in a period can cause a no Inventory period or shortage of
Inventory for a company

Receivable turnover ratio

 Recievable turnover
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Receivables Turnover Ratio (times) 27.21 21.88 34.14 32.73 36.20 41.79 31.48 37.16 30.70 22.85
Benchmark 21.51 22.85 30.34 38.93 45.93 46.38 40.75 39.42 41.78 72.34

Receivables Turnover Ratio (times) Benchmark

• The receivable turnover ratio determines how quickly receivables are realized into cash.
• The receivable turnover ratio has increased over the years and there has been a downfall in
2019. And as a result, the collection period has also increased in these years.
• HUL’s Receivable turnover ratio is poor as compared to the industry
• Realizing Cash from Receivables too soon demotivates debtors and also decreases goodwill
in the market, thus HUL needs to follow up with the industrial benchmark.

4- Profitability Ratio
This ratio measures the profits earned by a company. It assesses the company’s ability to
generate profits with respect to sales.

Gross Margin Ratio

Gross Profit
50.00
45.00
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Gross Profit Ratio 46.81 31.76 35.60 35.47 35.14 37.64 45.66 46.10 44.06 44.17
Benchmark 29.73 30.20 32.70 31.95 31.06 30.45 32.28 33.07 35.19 36.45

Gross Profit Ratio Benchmark

 • The Gross profit ratio measures the margin of profit available on revenue from
operations
• HUL’s GP margin ratio is initially decreasing, but then increasing at a slow rate. GP
has picked up pace in year 2016, and have significantly increased after that.
• HUL has maintained its GP margin above than the Industry benchmark all these
years.
• There is and overall slight increase in the GP ratio, indicating increase in GP. The
increase is at a slow pace initially but faster in the later years.

Net Profit Margin

NET PROFIT MARGIN

25.00

20.00

15.00

10.00

5.00

0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Net Profit Ratio 11.93 11.17 11.61 13.92 13.08 13.19 12.35 13.02 14.87 15.79
Benchmark 13.54 19.63 10.79 10.80 10.67 10.33 9.72 10.81 12.81 14.65

Net Profit Ratio Benchmark

• Net Profit ratio shows relation between the net profit earned and revenue
• The NP ratio is above industrial benchmark almost throughout these 10 years, it is
below the benchmark in years 2010, and 2011.
• The NP ratio has increased over the years, and there has been a major increase in
2019.

Interpretations & Suggestions

• It is a good sign for HUL, that the NP ratio is above the industry benchmark as it
shows that HUL is capable of earning from its sales, better than the other
companies.
• As the benchmark in 2019, is moving closer to HUL, HUL must strive to earn more
net profits on sales if it wants to stay above the benchmark.
Operating Profit Margin

OPERATING PROFIT MARGIN

30.00

25.00

20.00

15.00

10.00

5.00

0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Operating Margin Ratio 15.15 12.98 14.20 14.67 15.14 15.92 17.17 17.53 20.66 22.60
Benchmark 28.12 17.60 15.74 14.16 22.18 13.75 22.23 22.46 25.29 18.23

Operating Margin Ratio Benchmark

• The EBIT margin measures revenue from operations

• The operating profit margin of HUL has increased over the years, although there are
fluctuations in the industry operating profit margin
• A high operating ratio means a low net profit ratio, and it can also be analyzed that
HUL’s net profit ratio is lower than the operating profits.

Return Ratios
These ratios are checked to learn what profits an individual or a company can earn by
investing in the company being analyzed

Return on Investment

ROI
120.00

100.00

80.00

60.00

40.00

20.00

0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
ROI 79.04 65.09 59.68 98.44 88.00 88.95 56.92 81.82 86.63 92.27
Benchmark 69.31 59.80 45.17 54.71 58.08 65.93 58.50 61.35 80.48 77.58

ROI Benchmark
 • Return on Investment reflects the overall profitability of a company
• HUL is above average throughout and has shown outstanding return rate
• The ROI is
• The ROI has increased throughout the 10 years period indicating it to be a safe
company to invest into.
•

Return on Equity

• Return on Equity shows how much return do shareholders get by the capital
employed by them

ROE
70.00

60.00

50.00

40.00

30.00

20.00

10.00

0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Capital ROE 22.02 23.06 26.91 37.97 38.67 43.15 41.37 44.90 52.37 60.36
Benchmark 25.63 17.33 24.97 25.87 29.49 34.06 34.94 37.50 39.46 43.29

Capital ROE Benchmark

• HUL’s ROE has increased over the years which reflects that Equity shareholders are
earning more and more.
• High ROE is a good sign for potential investors because they will want to invest more
in the company.
• It is also significant for the current investors to measure how effectively their money
is used to generate income.
• It indicates that HUL has an effective management that is using the shareholders
fund efficiently than the other firms in the industry.
• Investors and Shareholders want to expect high return on equity as this will indicate
how effectively the funds are being used by the management.
 Ratio Analysis
- Nandini Kumari
- PGSF1922
Please make note of following points for computing horizontal analysis for year 2009-2018

1. Long term and short term borrowings for the company is not given, no debt equity ratio is
calculated. Please find attached image of balance sheet-

Liquidity Ratio

Calculated to check on company’s ability to pay off its current liability (short- term) using its
current asset. Two ratios to be taken into consideration:
a. Current Ratio = Current Asset/ Current Liability
b. Quick Ratio= Quick Asset/ Current Liability
(Quick Asset= Current Asset- Inventory- Prepaid Expenses)

Liquidity
Ratio: 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
Current Ratio 1.54 1.04 2.51 1.90 2.02 2.16 1.93 2.19 2.17 2.40
Quick Ratio 1.33 0.73 2.32 1.73 1.78 1.85 1.70 1.95 1.99 2.14

Current Ratio with Industry benchmark

Industry benchmark Current Ratio

10

0
2018 2017 2016 2015 2014 2013 2012 2011 2010
-10

-20

-30

-40

-50

-60

Quick Ratio with Industry benchmark

Industry benchmark Quick Ratio

20

10

0
2018 2017 2016 2015 2014 2013 2012 2011 2010
-10

-20

-30

-40

-50

-60

-70

The current and quick ratio for the year 2018 and 2017 is not good as compared to that of
the base year (2009). The company is efficient and has excellent current and quick ratio in
the year 2016. It shows an increasing percentage of 4.74 and 8.39 respectively. For further
previous years, from 2010- 2015, there has been an increase and decrease in the liquidity of
the company to that of a base year. The company, however, can maintain the ideal ratio of
1:1 for most of the years in case of quick ratio and is efficient to utilize its current asset to
pay off current liability as can be seen for the current ratio.
 There is not much difference between the graphs for current and quick ratio for the
company. Trend line of industrial benchmark and company’s liquidity is comparatively
higher.

Solvency Ratio

It is calculated to determine company’s ability to pay off its liability using its net income.
Major components of solvency ratio are-
a. Debt- Equity Ratio= Long Term Debt (Total Debt)/ Net worth (Shareholder’s equity)
b. Interest Coverage Ratio= EBIT/ Finance cost (Interest Expense)

Note: No debt equity ratio calculated

Solvency Ratio: 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
Debt-Equity Ratio 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Interest Coverage
Ratio 110.36 65.47 159.34 88.55 86.40 28621.00 7435.00 5892.67 7788.67 0.00

For interest coverage ratio, finance cost for year 2009 is zero so %change is calculated
considering base year 2010.

Interest coverage Ratio

300

250

200

150

100

50

0
2018 2017 2016 2015 2014 2013 2012 2011
-50

-100

-150

In 2013, the % change to that of the base year has increased by 267.47% which means a
company is capable of taking more loans.

For subsequent years, 2014-2018, the % change has declined. The company is still healthy to
pay off its loans throughout the year. It can in the future is in a good position to take more
loans for growth and expansion.

Turnover Ratio
 It helps to analyze efficiency of the company. Main ratios to be calculated under this are:
a. Receivable Turnover Ratio= Sales/ Average Receivables
b. Inventory Turnover Ratio= COGS/ Average Inventory
c. Asset Turnover Ratio= Sales/ Average Total Asset
d. Payable Turnover Ratio= Purchases/ Average Payable
Note: For averages, closing balances for the year is only taken into consideration

Turnover Ratio: 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
Receivable
Turnover Ratio 16.54 18.21 17.06 20.70 23.98 20.98 27.02 33.43 31.88 34.34
Inventory Turnover
Ratio 11.49 7.43 11.20 11.91 10.67 9.13 8.94 9.58 8.35 6.97
Asset Turnover
Ratio 1.72 2.08 1.18 1.21 1.37 1.42 1.18 1.18 1.10 1.17
Payable Turnover
Ratio 0.84 0.97 1.03 0.92 1.23 1.19 0.57 0.59 0.22 0.01

Receivable Turnover Ratio with Industry benchmark

Industry benchmark Receivable Turnover Ratio

60

40

20

0
2018 2017 2016 2015 2014 2013 2012 2011 2010
-20

-40

-60

The trend for receivable turnover ratio is declining when calculated with base year 2009. The
graph shows an increase in 2011 and begins to fall for next two years. There is a slight
improvement for the year 2014 and again begins to decline.

Industrial benchmark is higher than the receivable turnover ratio, which means company has
poor collection process.
 Inventory Turnover Ratio with Industry benchmark
Industry benchmark Inventory Turnover Ratio

80

70

60

50

40

30

20

10

0
2018 2017 2016 2015 2014 2013 2012 2011 2010

In the year 2017, the inventory turnover ratio has declined maximum. For the years 2018,
2014-2016, the company is efficient to produce and sell its goods quickly.

Then, a decline is noticed for the previous two years with a slight increase and again a fall.
Overall, the company can maintain a good turnover ratio.

The company’s performance is compartively better than the industrial benchmark.

Asset Turnover Ratio with Industry benchmark

Asset Turnover Ratio

90
80
70
60
50
40
30
20
10
0
-10 2018 2017 2016 2015 2014 2013 2012 2011 2010
-20

Company has improved its asset turnover ratio for the year 2017 and declined in 2018. In
the past years, there has been an increase and fall in the % change.
 Asset turnover helps to understand company’s ability to earn revenue from every value of
asset. The company earns maximum in 2017. It is suggested for company to increase its
sales. The company has overall been efficient to utilize its asset.

There is no calculation and comparison with industrial benchmark.

Payable Turnover Ratio

20000.00 18690.00
18107.52
18000.00
15611.58
16000.00 14765.26
13980.69
14000.00 12764.34

12000.00
10000.00 8574.37 8869.68

8000.00
6000.00
3231.91
4000.00
2000.00
0.00
2018 2017 2016 2015 2014 2013 2012 2011 2010

Payable turnover ratio helps to understand payback capabilities of the company.

The company was most efficient in the years 2013-2014 to pay its creditors and declined for
year 2015.

Company should maintain high payable ratio to maintain healthy credit purchase. The
company initially had increased %change for first five years and then declined in next year
with an increase and then fall in the %.

There is no calculation and comparison with industrial benchmark.

Profitability Ratio

It is calculated to determine a company’s ability to generate profits. Main ratios to be taken

into consideration are:
a. Gross Margin Ratio= (Gross Profit/Sales)*100
b. Operating Margin Ratio= (Operating Profit/sales)*100
c. Net Margin Ratio= (Net Profit/sales)*100
d. Return on Equity= (Net Profit- Preference Dividend)/ Net Worth
e. Return on capital employed= EBIT/ Total capital employed

Profitability Ratio: 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
Gross Profit Ratio 42.14 45.49 44.06 39.85 38.74 35.99 36.61 39.68 50.29 51.30
Net Profit Ratio 15.26 17.89 16.58 14.68 14.64 11.98 13.93 14.55 19.66 23.14
Operating Margin 23.91 28.21 25.09 21.48 22.57 16.87 17.14 17.05 25.56 29.97
Return on Equity 0.47 0.82 0.28 0.28 0.30 0.25 0.26 0.25 0.34 0.41
Return on
Investment 0.73 1.30 0.42 0.41 0.46 0.36 0.32 0.29 0.44 0.53

Gross Profit Ratio

Industry benchmark Gross Profit Ratio

40

30

20

10

0
2018 2017 2016 2015 2014 2013 2012 2011 2010
-10

-20

-30

-40

Net Profit Ratio

Industry benchmark Net Profit Ratio

30
20
10
0
-10 2018 2017 2016 2015 2014 2013 2012 2011 2010

-20
-30
-40
-50
-60

The gross profit ratio helps to understand the operational performance of the business. The
firm from the year 2012-2017 has consistently high margin result from fall in the year 2011.
The company was at its maximum in the year 2010. The ratios are positive but has shown a
decline from that of base year. It can be said that the company is able to make reasonable
profits on sales keeping its overheads cost controlled. It will likely attract more and more
investors and should be consistent at maintaining high %.

Net Profit ratio is calculated to understand company’s profitability and valuation. If the net
profit ratio of a company is improved, it results in an overall improved performance of the
company. The company can be seen to improve its % change from year 20114 to 2017 and
again begins to fall. In the first five years, as compared to base year 2009, the company had
falling net profit till 2013. Overall, it can be said that the company is competitive and
healthy.

Operating Margin
Industry benchmark Operating Margin

40
30
20
10
0
-10 2018 2017 2016 2015 2014 2013 2012 2011 2010

-20
-30
-40
-50

Return on Equity
Industry benchmark Return on Equity

100%

80%

60%

40%

20%

0%
2018 2017 2016 2015 2014 2013 2012 2011 2010
-20%

-40%

Operating margin is return on sales. A company with high operating margin is efficient in its
operations. The company has declined its %change from 2011-2013 and began to increase
till year 2017. It is at maximum in the year 2017 and begins to falls in subsequent year. The
ratios are however positive but the company should be consistent at maintaining its
%change. The company is earning well to pay off its variable and fixed costs.

ROE is ability of company to generate profits from the investments done by shareholders. It
is the profit earning capability that the shareholders are most interested in. Considering the
base year 2009, there has been a decline in subsequent years till 2016a and then it rises for
year 2017 and again falls. The company has good ROE and should be consistent at maintain
its ratio. Company will not require to take more debts for investments as is able to raise
subsequent funds from shareholders.
 Return on Investment
Industry benchmark Return on Investment

200

150

100

50

0
2018 2017 2016 2015 2014 2013 2012 2011 2010
-50

-100

ROI is calculated to relate profits with capital invested.

The company sees a decline change from 2010-2016 as compared to that of base year 2009.
It is at its maximum with 146.28% in the year 2017 and falls in next year. Company should
maintain at least a 15% return on investment.
 RATIO ANALYSIS OF COLGATE
By Shreeya Verma
PGSF1952
Current ratio

Colgate 0.96 1.08 0.87 0.93 0.80 0.78 1.01 1.09 1.13 1.07
Benchmark 1.00 0.90 1.36 1.08 1.29 1.33 1.34 1.69 1.85 1.87

Current ratio is a liquidity ratio which measure the company’s ability to pay short term
liabilities. Theoretically the ideal ratio is 2:1. From the given data we can see that in most of
the year the current ratio is declining. It took rise in 2011 and then in 2017. This shows that
the company doesn’t hold enough funds to pay its current liabilities. Also, the company has
low ability to pay it current liabilities. Or we can say that the company has invested less in
current assets than what it was required to be invested. So, the company should increase its
current assets to reach the its benchmark.

Quick Ratio
Colgate 0.72 0.85 0.57 0.58 0.50 0.52 0.78 0.76 0.89 0.87
Benchmark 0.79 0.52 0.91 0.80 0.93 0.97 1.03 1.28 1.50 1.57

Quick ratio is ideally or theoretically 1:1. Quick ratio is highly liquid and can easy be
converted into cash. In the above graph, as we can see that from 2010 to 2014, the
benchmark and the quick ratio of Colgate CO. is very close to each other. But as the year
passed by the ratio starts to build a gap between the bench march. Overall, the graph of
quick ratio is declining this means that the company does not hold enough quick assets to
pay its current liabilities. Hence it is suggested to the company to either increase its
investment in current assets and quick assets or to decrease its current liabilities otherwise
it can soon fall into debt-trap.

Receivable Turnover Ratio

Colgate 21.13 21.39 34.56 45.43 60.47 68.65 39.95 31.35 30.78 212.84
Benchmark 21.51 22.85 30.34 38.93 45.93 46.38 40.75 39.42 41.78 72.34

Receivable turnover ratio is an accounting measure to know how much a company is efficient
in collecting its receivables. Low ratio indicates that the company has a high amount of cash
revivals for collection from its debtors. As we can see in the above graph, from 2010 to 2013
the ratio was quite good, but it suddenly falls down n then again come closer to its
benchmark. But in 2019, it has risen to 212.84 whereas the benchmark is quite low. This
shows that the company is highly efficient in collecting receivables and the customers pay
their debts quickly.

Inventory Turnover Ratio

Colgate 9.95 10.41 7.94 8.27 9.32 9.67 10.26 7.36 8.71 10.25
Benchmark 9.74 7.92 9.96 10.83 11.48 11.69 11.63 10.44 10.48 10.74

Inventory turnover ratio shows that how quickly the inventory is being converted into sales.
Here in the initial stages the company was performing good. Then the ratio has a fluctuating
nature over the span of 10 years. But in 2019, it finally reaches to its benchmark, which is a
good sign. It is good to have high turnover as it shows the industry is generating more
revenue with limited inventory.

Gross Profit Ratio

Colgate 44.23 45.09 48.24 47.57 44.17 41.88 41.43 41.45 42.22 45.49
Benchmark 29.73 30.20 32.70 31.95 31.06 30.45 32.28 33.07 35.19 36.45

Gross profit ratio is a ratio which shows the relationship between gross profit and total net
sales revenue. In the above graph, through out the period the ratio is quite high from its
benchmark which states that it has a high net sale with constant COGS or a reduced COGS
with constant sales. So, to reduce it, we should decrease the gross profit margin as the
company is earning more on its per unit. So, if we reduce that it will be closer to its
benchmark.

Net Profit Ratio

Colgate 17.50 15.66 12.86 12.50 13.27 14.37 15.31 16.32 17.37 19.97
Benchmark 13.54 19.63 10.79 10.80 10.67 10.33 9.72 10.81 12.81 14.65
Net profit ratio shows how much percentage of net profit is earned on 1 percent of sale of
goods or services. Here we can see that the net profit ratio is a bit fluctuating. As well as the
it is quite high from its benchmark. A high ratio may indicate low direct and indirect costs
which will result in a higher net profit of the organization. So, to decrease the ratio we must
either reduce the gross profits or decrease the expenses.

Operating Margin Ratio

Colgate 25.83 22.86 18.96 17.95 18.53 19.37 20.44 21.56 22.51 23.01
Benchmark 28.12 17.60 15.74 14.16 22.18 13.75 22.23 22.46 25.29 18.23

Operating profit ratio sows the percentage of operating profit (EBIT) earned for one percent
of sales. we can see that the company is able to generate a good percent of EBIT for all years
except for the year when it incurred losses i.e. from year 2011-13. When we talk about
percentage change, we can understand that the company is not able to manage its
operating profits in many years. The benchmark is very fluctuating in comparison to Colgate.

Return on Equity
Colgate 53.61 44.17 45.33 56.55 72.56 90.00 101.46 102.54 104.82 127.37
Benchmark 25.63 17.33 24.97 25.87 29.49 34.06 34.94 37.50 39.46 43.29

Return on Equity is a measure of the profitability of a business in relation to the equity. Here
the ROE is increasing as the year passes by which indicates that the investment gain is
comparatively favorable to its cost. Whereas when we see to our benchmark it is quite
constant. So to reduce ROE we can use more of financial leverage and also increase the
profit margin.

Return on Investment
Colgate 75.11 64.48 66.84 81.23 101.31 121.35 135.43 135.49 135.79 144.66
Benchmark 40.26 25.52 50.57 26.97 49.21 49.89 53.05 47.27 643.32 498.81

Return on capital employed explains the analyst the percentage earned on net investment or
net capital employed in the business. Return on capital employed or commonly known as
Return on investment. In the above graph ROI is constant through out year. But when we see
the benchmark it has taken a drastic rise in year 2018. So, to increase the ROI we should
generate more sales and revenues or raise our prices so that there is increase in our return on
investment.
 Name : Toshik Shrimali
Roll no: pgsf 1938

Nestle
(Good food, good life)

Nestle is one of the world’s biggest foods and beverages company worldwide. They have
more than (2000) brands ranging from local items to one of the local favorites. And they are
also present in more than 190 company world-wide including India.
The nestle India is listed in NSE: NESTLEIND(national stock exchange) BSE:(Bombay stock
exchange) 500790.
The competitor of nestle are HUL, P&G, DAUBER, ITC, AMUL etc.
As per the given assignment we were given a project in which we have to select a service or
manufacturing company in which we need to calculate the ratios (liquidity ratio, solvency
ratio, profitability ratio, turnover ratio). The industry which over group took was FMCG and
the company which I selected was nestle.

Liquidity Ratio
Current Ratio: Current ratios are a part of liquidity ratios it helps to measure whether the
company is able to pay or meet the short term provision of the company. The ideal ratio for
current ratio is (2:1).
Except 2016 the company’s current ratios is very low or extrema high which implies that the
company is not able to meet its optimum current ratios, when the ratio is low which says
the company should invest more in its current asset to achieve its optimum level. And when
the ratios are high the company should invest low in their assets.
year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

current ratio 0.60 0.51 1.32 0.88 1.71 1.45 1.68 2.01 2.64 2.55

Benchmark 1.00 0.90 1.36 1.08 1.29 1.33 1.34 1.69 1.85 1.87
 current ratio
3.00 2.64 2.55
2.50 2.01
1.85 1.87
2.00 1.71 1.68 1.69
1.36
1.32 1.45
1.33 1.34
1.29
1.50 1.00 1.08
0.90 0.88
1.00 0.60 0.51
0.50
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

nestle nestle Benchmark

Quick Ratio: Quick ratio is also a part o liquidity ratio it is also known as the acid – test ratio
it mainly measure whether the company is able to use its near cash or quick assets to re pay
its current liability. The ideal ratio of quick ratio is (1:1).
As we can see in the graph that the company is in the good condition to pay of its current
liability which implies that the quick assets are equal to 1 or more then 1 which means that
company can get rid of its current liabilities.
year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

% change in quick ratio 0 -95.69 -57.44 -25.91 30.51 -7.26 26.15 60.63 128.29 127.74

Benchmark 0.79 0.52 0.91 0.80 0.93 0.97 1.03 1.28 1.50 1.57

quick ratio
2.50
2.03 2.03
2.00
1.50 1.57
1.43
1.50 1.28
1.16 1.12
0.97 1.03
0.89 0.91 0.93
1.00 0.79 0.80 0.83
0.66
0.52
0.38
0.50
0.04
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Nestle Nestle Benchmark

Solvency ratio
Debt Equity Ratio: one of the important ratio which is used in the corporate finance. As it is
used to measure weathers the company is financing its operations through there debt. The
ideal ratio of debt equity is (1:1.5).
As we can see in my graph the debt equity ratio is going down in 2014,2015 and 2016 which
implies that the company will not able to get its return on equity.
years 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
debt equity ratio 0.17 0.12 0.57 0.06 0.50 0.01 0.01 0.01 0.36 0.36

debt ratio
300 240.4
200.4
200 117.8 117.8
100
0
-28.5
0 -64.9
-96.8 -96.5 -93.4
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-100
-200

Total Equity Ratio: It is a part of solvency ratio the ideal ratio for this is 2 or 3 as we can see
in my graph the company is able to maintain its intrest coverage ratio from 2009-2010,
excet the year 2017-2018 it was the year in which the company in which the company
incurred losses.
years 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

total equity ratio 1.07 0.78 2.46 3.05 1.67 1.05 1.16 1.26 75.38 82.90

total equity
9000
7661.3
8000
6956.8
7000
6000
5000
4000
3000
2000
1000 130.2 185.9 55.9
0 -26.7 -1.6 8.6 17.8
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-1000
EBIT: Earning befor interests and taxes margin. It is a measure of a company profitability on
sales over a specific time period. It is used at the time of comparing the companies with
other companies.
As we can see in the graph ebit is incresing which implies that company is earning good
profits.

EBIT
2500
2142.9

2000

1500 1354.1 1335.0

1000
572.8
500
195.8 144.1
0 -22.3 -19.4 24.8
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-500

Turnover ratio/activity ratio

Inventry turnover ratios: Is use to mesure or we can say that it is use to calculate weather
the company has an excessive inventory in comparision to it sales level.
We can say that my company (nestle) has increasing the invetry from the year 2009 to 2013
as and after that in 2014 to 2016 there is a slite fall and then again there is a increase.
Which implies that company is dowing good seals/ and genarating good revenew.
year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
inventry 6.63 7.89 10.21 11.14 12.37 11.67 9.96 9.78 11.29 11.70

Benchmark 9.74 7.92 9.96 10.83 11.48 11.69 11.63 10.44 10.48 10.74
 inventry turnover ratio
14.00 12.37
11.48 11.69
11.67 11.63 11.29 11.70
12.00 11.14
10.83 10.74
10.21 10.44 10.48
9.74 9.96 9.96 9.78
10.00
7.92
7.89
8.00 6.63

6.00

4.00

2.00

0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Nestle Nestle Benchmark

Assets Turnover Ratios: It tels us about the ability of a company to convert its total assets
into sales or the ability of the compny to convert its assets into money.
As we can see in the graph the turnover ratio of the company is modarate which means
that company is able to make use of its assets.
year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

asset 0.46 0.56 1.70 1.61 1.44 1.69 1.34 1.36 1.38 1.40

assets turnover ratio

300
267.65 266.18
247.65
250
211.67
199.34 201.90
190.45 193.05
200

150

100

50 21.15
0
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Trade Recivables Ratios: these ratios are usese by the company to manage the credit and
how quickley the company is able to collect its short term debt.As we can see in the graph
the trade recivables are increasing constently which implies that the company are able to
collect its short term debt.
year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

trade recivble 41.67 51.76 64.91 94.78 107.96 99.44 104.28 94.12 114.52 90.63

Benchmark 21.51 22.85 30.34 38.93 45.93 46.38 40.75 39.42 41.78 72.34

trade recivables
140.00
114.52
120.00 107.96 104.28
94.78 99.44
94.12 90.63
100.00
72.34
80.00 64.91
60.00 51.76
41.67 45.93 46.38 41.78
38.93 40.75 39.42
40.00 30.34
21.51 22.85
20.00

0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Nestle Nestle Benchmark

Trade payble ratios: It says that weather the company is able to oays it accounts payble by
comparing there net credit purchase to the average accounts payble in a period.My graph
shows a slightly increase from 2010 to 2012 and then starts falling.Which implies that the
company is talking more time to pay to its creditors.
year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

trade payble 3.34 3.56 10.07 16.31 9.07 8.61 6.84 7.18 6.31 5.38

trade payble
500
388.89
400

300
202.05
171.84 158.04
200
105.01 115.31 89.25
100 61.44
0 6.62
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Profitability ratios:
Gross profit: Gross Profit ratios shows good relations between gross profit ant net sales. It
helps in calculating the operating performance of the business.
As we can see in the graph the gross profit is increasing from 2009 to 2018 constently.
Which implies that the company is in a good posission. And genarating good gross profits.
year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
gross profit 15.26 28.41 35.34 36.59 36.94 36.36 37.32 37.78 39.02 40.86

Benchmark 29.73 30.20 32.70 31.95 31.06 30.45 32.28 33.07 35.19 36.45

gross profit
45.00 40.86
37.78 39.02
40.00 36.59 36.94 36.36 37.32 36.45
35.34 35.19
32.70 31.95 32.28 33.07
35.00 29.73 30.20 31.06 30.45
28.41
30.00
25.00
20.00 15.26
15.00
10.00
5.00
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Nestle Nestle Benchmark

Net Profit: It shows how much percentage of net profit is earned on 1 persent of sales of
goods.
In my company we can see that the net profit is constent for all the year but in 2009 to 2010
it has incured profits as compare to others years. But we can see in % change the company
net profit has gone down (negative) which implies that it is not good sign for the company.
year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

net profit 22.99 53.37 12.84 12.86 12.27 12.02 6.89 10.04 12.02 14.23

Benchmark 13.54 19.63 10.79 10.80 10.67 10.33 9.72 10.81 12.81 14.65
 net profit
60.00 53.37

50.00

40.00

30.00 22.99
19.63
20.00 13.54 12.84 12.86 12.81 14.65
14.23
10.79 10.80 12.27
10.67 12.02
10.33 10.81 12.02
9.72 10.04
6.89
10.00

0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Nestle Nestle Benchmark

Capital Employed: Return on capital employed analysis the percentage earned on net
capital employed in the business.
In my company nestle we can see that the company is getting negative graph we can say
that this is not a good sign for the company.
year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

return on capital employed 51.88 18.37 52.00 34.27 35.47 36.46 31.23 39.47 39.47 28.03

Benchmark 25.63 17.33 24.97 25.87 29.49 34.06 34.94 37.50 39.46 43.29

capital employed
60.00 51.88 52.00
50.00 43.29
39.47
37.50 39.47
39.46
34.27 35.47 36.46
34.06 34.94
40.00 31.23
29.49 28.03
25.63 24.97 25.87
30.00
18.37
17.33
20.00
10.00
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Nestle Nestle Benchmark

Operating Profits: It shows that the percentage of operating profit(ebit) earned for one
preceny of sales. In the case of nestle we can say the company is earning a good amount of
ebit for all the years excepts 2017.
We can say that there is a fall in operating profit for each year which is major in the year.
year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

operating profit 75.68 23.93 20.37 16.66 54.58 16.52 56.32 56.09 57.59 15.47

Benchmark 28.12 17.60 15.74 14.16 22.18 13.75 22.23 22.46 25.29 18.23

operating profit
75.68
80.00
70.00
56.32 56.09 57.59
60.00 54.58

50.00
40.00
28.12
30.00 23.93 25.29
20.37 22.18 22.23 22.46
17.60 15.74 16.66 16.52 18.23
20.00 14.16 13.75 15.47

10.00
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Nestle Nestle Benchmark

Return on investment: it helps in measures the gain or the loss generated on the invested.
Roi is percentage used for the financial decision making to compare the company
profitability or to compare the efficiency of the company. As we can see in nestle the ROI is
high in 2010 which says that the company is able to generate profit from the investment.
year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Nestle 139.13 122.27 47.47 39.29 34.23 39.90 28.61 29.13 32.90 40.76
Benchmark 69.31 59.80 45.17 54.71 58.08 65.93 58.50 61.35 80.48 77.58

ROI
160.00 139.13
140.00 122.27
120.00
100.00 80.48 77.58
69.31 65.93
80.00 59.80 54.71 58.08 58.50 61.35
60.00 47.47
45.17 40.76
39.29 34.23 39.90
28.61 29.13 32.90
40.00
20.00
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Nestle Nestle Benchmark

PROJECT ON RATIO ANALYSIS
FMCG
Analysis of Britannia’s Financial Condition from 2010-2019

1 - Liquidity Ratio
This ratio explains the relationship between the current liabilities and current assets. It is
used to assess a firm’s ability to meet its short-term obligations.
Current Ratio and Quick Ratio are two ratios to check the Liquidity.

Year
Current Ratio Current Ratio
Industry Benchmark
3

2.5

2
Current Ratio

1.5

0.5

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year
The current ratio of the company is fluctuating and is below the benchmark for the initial
years, but moved above the bench mark from 2017.
 Quick Ratio Quick Ratio
Industry Benchmark
2.00
1.80
1.60
1.40
Quick Ratio

1.20
1.00
0.80
0.60
0.40
0.20
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year
The quick ratio of the company is below the benchmark, but has improved in 2018.

2 - Solvency Ratio
These ratios are calculated to assess the ability of a company to meet its long-term
obligations
It is also used to check how much money has been invested by investors and how much
money has been taken as debt by the company. This ratio measures the risk of investing in a
company.

IC Ratio Year
Interest Coverage Ratio
10000
Industry Benchmark
9000
8000
7000
6000
IC Ratio

5000
4000
3000
2000
1000
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year

The Interest coverage ratio is matching with the industry benchmark.

3 - Turnover Ratio

This ratio indicates the proper use of resources provided to the business, or how well it
coverts its resources into profits.
 RT Ratio Reciveables Turnover

100.00 Industry Benchmark

90.00
80.00
70.00
60.00
RT Ratio

50.00
40.00
30.00
20.00
10.00
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year

4 - Profitability Ratio
This ratio measures the profits earned by a company. It assesses the company’s ability to
generate profits with respect to sales.

GP Ratio Gross Profit Ratio

40.00 Industry Benchmark

35.00
30.00
25.00
GP Ratio

20.00
15.00
10.00
5.00 0.27 0.27 0.27 0.31 0.38 0.40 0.33 0.36 0.41
0.23
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year
 NP Ratio Net Profit Ratio

20.00 Industry Benchmark

18.00
16.00
14.00
12.00
NP Ratio

10.00
8.00
6.00
4.00
2.00 0.03 0.03 0.05 0.04 0.06 0.09 0.10 0.10 0.11 0.11
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year

OP Ratio Operating Ratio

30.00 Industry Benchmark

25.00

20.00
OP Ratio

15.00

10.00

5.00
0.03 0.04 0.05 0.04 0.06 0.09 0.10 0.10 0.11 0.12
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year

ROI Ratio Return on Investment

100.00 Industry Benchmark

90.00
80.00
70.00
ROI Ratio

60.00 49.41
50.00 41.74 43.43 42.19
40.00 32.36 29.06
26.96 28.68
30.00
20.00 13.69 14.15
10.00
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year
The ROI of the company is below the average benchmark set by the industry
 ROCE Ratio Return on CE

50.00 Industry Benchmark

45.00
40.00
35.00
ROCE Ratio

30.00
25.00
20.00
15.00
10.00
5.00 0.19 0.22 0.32 0.30 0.44 0.43 0.38 0.33 0.30 0.28
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year