A

RESEARCH REPORT ON

RATIO ANALYSIS

SUBMITTED TOKURUKSHETRA UNIVERSITY, KURUKSHETRA

In the partial fulfillment for the requirementOf the degree of

MASTERS OF BUISNESS ADMINISTRATION

2012-2014

Under the guidance of: Submitted By:Ms Sunita Yogesh KumarFaculty, MBA MBA (Final)

Swami Devi Dyal Institute of Engg & TechnologyBarwala (Punchkula)

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SECTION PAGE NO.

Certificate 3

Preface 4

Acknowledgement 5

Declaration 6

Chapter – 1 (Introduction) 7-26

Introduction To Project

Introduction To Industry Profile

Chapter – 2 (Review Of Literature) 27-28

Chapter – 3 (Research Methodology) 29-30

Objectives Of Study

Scope Of The Study

Limitation Of The Study

Data Analysis And Interpretation 31-82

Findings 83-85

Conclusion And Suggestions 86-88

Bibliography 89-90

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CERTIFICATE

This is to certify that MR. YOGESH KUMAR student of MBA 4th. Semester of our Institute has

completed the PROJECT titled RATIO ANALYSIS, under my guidance and that no part of this

report has been submitted for the award of any other Degree or Diploma to any other Board or

University.

Ms. Sunita Principal Faculty

SDDIET

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PREFACE

Someone has rightly said that practical knowledge is far better than classroom teaching.

During the course of this project we actually realized how true it is when we analyzed the and the real

world of Financial aspects. This project enabled me to know the how a company analyise its financial

efficiency and its operational efficiency.

The subject of my study is “RATIO ANALYSIS” which is a tool for making the financial analysis

of any organization. I have made financial analysislysis of DABUR INDIA LIMITED by using the

ratios of the company and for this I have taken the three years data of the company so that

performance can be analyzed..

The report contains at first, the brief introduction about the RATIO ANALYSIS then the introduction

about company, the products and services being offered by the it, study of the ratios and ratio analysis

of the company . and then the findings and analysis of the research on the basis of which final

suggestions and conclusion has been drawn.

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ACKNOWLEDGEMENT

This study was made possible with the consultations, support and kind opinions from several people. So with

immense gratitude, I acknowledge all those, whose guidance and valuable inputs have helped in the

materialization of this project.

I am indebted to LECT. Ms Sunita, faculty of finance, SDDIET, BARWALA for her unfailing support throughout

the study. Her timely suggestions and novel ideas provided a better insight for the organizational study of the

company.

I thank SDDIET, BARWALA, for providing me with the opportunity to carry out this project.

I thank all my friends, whose help and suggestions, have helped shape my project into what it is today.

.

YOGESH KUMAR

ROLL NO-1228

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DECLARATION

I YOGESH KUMAR student of MBA IV Semester, studying in SWAMI DEVI DAYAL

INSTITUTE, BARWALA hereby declare that this project, titled “RATIO ANALYSIS” has been

prepared by me as part of the requirements of the MBA Program of the KURUKSHETRA

UNIVERSITY (Batch of 2012-2014) is my original piece of work and is done with the total integrity

to my pursue my research objectives.

My guide for the project has been lect. SUNITA.

No attempt has been made to manipulate any information and it is authentic to the best of

my knowledge. All the sources of information have been duly disclosed.

YOGESH KUMAR

ROLL NO- 1228

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CHAPTER-1

INTRODUCTION

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RATIO ANALYSIS

INTRODUCTIONThe ratio analysis is one of the most important and powerful tools of financial analysis. It is the

process of establishing and interpreting various ratios. It is with the help of ratios that the ratios that

the financial statement can be analyzed more clearly and decisions can made from such analysis.

Ratio Analysis enables the business owner/manager to spot trends in a business and

to compare its performance and condition with the average performance of similar businesses in the

same industry. To do this compare the ratios with the average of businesses similar to it and compare

its own ratios for several successive years, watching especially for any unfavorable trends that may be

starting. Ratio analysis may provide the all-important early warning indications that allow to solve the

business problems before the business is destroyed by them.

The Balance Sheet and the Statement of Income are essential, but they are only the

starting point for successful financial management. So we apply Ratio Analysis to Financial

Statements to analyze the success, failure, and progress of the business.

CONCEPT OF RATIO A ratio is a simple arithmetical expression of the relationship of one number to

another. It may be defined as the indicated quotient of two mathematical expressions. According to

Accountant’s handbook by Wixonkell and Bedford, a ratio “is an expression of the quantitative

relationship between two numbers”.

Ratio analysis is the technique of calculation of number of accounting ratios from the

data found in the financial statements, the comparison of the accounting ratios with those of the

previous years or with those of other concerns engaged in similar line of activities or with those of

standard ratios and the interpretation of the comparison.

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Definition

“Single most important technique of financial analysis in which quantities are

converted into ratios for meaningful comparisons, with past ratios and ratios of other firms in the

same or different industries. Ratio analysis determines trends and exposes

‘ .

RATIO ANALYSIS While ratios can tell us much about a company, it is important to note that ratios are most effective when analyzing a ratio’s trend or when comparing a ratio against its competitors. Understanding the company’s history and environment is key in determining its health, value, and future potential. It is also important to note how the ratio is changing. For example, take the P/E ratio, which is the stock price divided by earnings of the company. Essentially, this tell us how much investors are willing to pay for $1 of earnings the company generates. If the P/E ratio falls, it may be due to two possible factors: 1) The stock price falls, which generally is probably not a good thing, or 2) earnings are up, and the stock price simply hasn’t compensated for this change yet, which is a good thing. There are many sources that will give a comprehensive listing of financial statements and historical pricing to calculate these ratios.

V ALUATION OF R ATIOS

Earnings per Share (EPS )

Net Income = Share outstanding

Mathematical Definition: Net Income divided by shares outstanding. Conceptual Definition: This number represents the profit of the company equally split among each share of the stock. In essence, if you own one share of the company, how much of that profit is designated to your share. Notes:

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• EPS is closely watched due to the fact that we notice a strong correlation between EPS and the stock price, i.e., when EPS climbs, the stock price will appreciate. This is aside from the fact that the market is in a recession or learning that the company is forging its accounting books.

• EPS is one of the most popular variables when valuing a company. So important, in fact, that analysts are constantly issuing estimates on what future EPS may be.

• One way to analyze a trend is on a basic trend basis: quarter after quarter after quarter, etc. The other way is to compare each quarter to the same quarter of last year. The rationale is this: some companies experience seasonality, seasonality being during certain times of the year a company will see a predicable increase/decrease in sales and profit (i.e. retail stores during the Christmas season). If this is the case, it is difficult in just one year’s period

Book Value Per Share (BV) = Stock holders equity-preferred stock

Average outstanding shares

Mathematical Definition: Stockholder’s Equity subtracting out Preferred Stock, all divided by the average outstanding shares over given period.

Conceptual Definition: This shows us the accounting value of a company versus the market value. While market value incorporates investors’ expectations and potential growth, the accounting value shows us the bare numbers of costs and earnings.

Benchmark: The industry average is generally used to gauge whether the company’s profit margin is adequate or not.

Notes:

• Generally, the market value (stock price) of the company is probably going to be significantly higher than the book value, particularly in a bull (strong) market. In a bear (weak) market, the market and book value will probably be close to equal. If the market value is below the book value, this may be a potential sign of undervalue.

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Price-to-Earnings Ratio (P/E)

= Stock price Earning per shareMathematical Definition: P/E compares the current price of one share of stock divided by the company’s earnings of one share of stock.

Conceptual Definition: Essentially, this ratio tells us how much investors are willing to pay for every one dollar of earnings the company pulls in. Investors are willing to pay more than simply matching dollar for dollar because they expect the company to appreciate in value, i.e., the stock price to go up.

Benchmark: Many investors agree that a comfortable (or reasonable if you will) general P/E ratio is 20. More conservative investors may still feel that this number is too high, and will use 15 instead. Notes:

• Also known as the “multiple”.

• Just because a company’s P/E ratio may decrease over time does not mean that the company’s value or outlook is decreasing as well. It may simply mean that earnings are growing faster comparative to the stock price.

• Most P/E ratios calculated will use historical EPS. Use earnings estimates issued by analysts (First Call) to get a P/E looking into the future.

• Companies with negative earnings (losing money) do not have a P/E.

• Another ratio which may soon be considered the replacement to the P/E is the PEG, or the Price/Earnings to Growth ratio, which is next:

Price/Earnings to Growth Ratio (PEG)

Price to earning ratio

Annual earnings per share growth

Mathematical Definition: The price of the stock divided by the earnings per share divided by the annual earnings per share growth. Conceptual Definition: Simply a variation on the P/E ratio, The PEG ratio compares a company’s P/E to their earnings growth. If the PEG ratio is 1, the indicator tells us that the market prices the stock perfectly to the earnings growth. If the PEG is above 1, it may be an indication that the stock is overvalued. Vice versa, the stock may be undervalued if the PEG ratio is below 1. Notes: • The PEG ratio is becoming increasingly popular over the P/E ratio because it factors in growth, whereas P/E does not.

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P ROFITABILITY R ATIOS

Net Profit Margin Net income

Revenue

Mathematical Definition: Net Income divided by Revenue, expressed as a percentage. Conceptual Definition: We remember the basic Income equation: Revenue – Expenses = Net Income. This tell us how much of the revenue, or sales, that is generated can be kept as profit for the company, and that their expenses are kept in check. Benchmark: The industry average is generally used to gauge whether the company’s profit margin is adequate or not. Notes:

• A low profit margin may not necessarily reflect that the company itself is doing poorly in either business or too many expenses, but rather a possible pricing strategy with their product/service or the impact competition is having on them.

Gross Profit Margin Revenue-cost of good sold

RevenueMathematical Definition: Revenue without Cost of Goods Sold, all divided by Revenue.

Conceptual Definition: This allows us to see the profit after operating expenses only have been taken into account. This assists in helping us understand the financial health of the company in terms of knowing whether or not the company’s profit is enough to pay off its other expenses.

Notes:

• The use of having both a Net Profit Margin and a Gross Profit Margin may seem redundant, but can be very helpful when analyzed together. In doing so, one can see which part of a company’s expenses are weak in terms of minimizing the cost.

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M ANAGEMENT E FFECTIVENESS

Return on Assets (ROA ) Net incomeTotal asset

Mathematical Definition: Calculated by dividing a company’s annual earnings by its total assets, expressed as a percentage. Conceptual Definition: Shows the profitability of a company relative to the total assets. Benchmark: Industry average. Return on Equity (ROE ) Net income

Total equityMathematical Definition: Calculated as Net Income divided by the Total Equity of the company. Conceptual Definition: This shows us the profit per dollar from the investors. Since pleasing the investors is key with publicly traded companies, this is a very important ratio.

Notes:

• Investors can tweak this ratio to see more accurately what was the return on their investment. For example, if you are a common shareholder, you may want to replace “Net Income” with “Net Income – Preferred Dividends”.

• If new shares were issued throughout the year this ratio is calculated for, then use the weighted average of the number of shares.

• As an investor, you should expect a higher ROE for growth companies.

• Companies that bring in high profits per dollar will tend to pay off shareholders in the form of higher dividends.

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F INANCIAL S TRENGTH /S OLVENCY R ATIOS

Current Ratio Current asset

Current liabilities

Mathematical Definition: Defined as Current Assets divided by Current Liabilities, this ratio is a measure of short-term solvency. Conceptual Definition: The current ratio shows us how well a company is able to pay off its short-term debt using its most liquid assets. Benchmark: “1”; A ratio of “1” would indicate that the company has exactly enough cash (or assets that is relatively easy to turn into cash) to pay off its debt. If the ratio is higher than “1”, the company can successfully pay off its debt while at the same time still have cash left over to continue operating. Naturally, if the ratio is under “1”, then investors should be weary of the fact that the company cannot pay off its short-term debt if necessary. I a company has a ratio of “2.5”, one can say the company can pay off its liabilities more than two times over. Notes:

• There is such thing as “too high” a current ratio. For example, if a company has a ratio of “7”, it may mean that the company is not effectively using their money; there is too much cash sitting around doing nothing. Perhaps the company should be using their money to invest in other projects? On the other hand, the company may be stockpiling their money to buy out another company.

• More conservative investors may consider a benchmark of “1.5” and a benchmark of “1” for the Quick Ratio (which is next).

• While the Current Ratio has its own benchmark, there may be times in which one might wish to forego this number. For example, the industry average in which a company you are looking at may be a Current Ratio of 0.75. In this case, it may be important to consider why the industry average is so low, and whether or not you should be comparing the company against its own benchmark, or the industry’s benchmark.

Quick Ratio (Acid Test ) Current assets-inventory

Current liabiltiesMathematical Definition: Current Assets subtracting out Inventory, all divided by Current Liabilities. Conceptual Definition: Much like the Current Ratio, the Quick Ratio is a measure of how well the company can pay off its liabilities. However, because we subtract out inventory, this ratio becomes a much more rigorous test of liquidity. The reason being inventory is considered the least liquid of the current assets.

Notes: • If the Quick Ratio is significantly lower than the Current Ratio, then it indicates the company is heavily dependent upon inventory.

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Total Debt to Equity Total liabilities Total equity

Mathematical Definition: Total Liabilities divided by Total Equity.

Conceptual Definition: The Total Debt to Equity ratio helps us measure a company’s financial leverage. It shows us how much of a company’s financing of assets is due to investors putting in money into the company, or perhaps loans taken out by banks.

Benchmark: “1”; A ratio greater than “1” indicates the company’s assets are mainly financed with debt, while a ratio less than “1” indicates the company’s assets are primarily supplied with equity. The higher the ratio, the more leverage a company has, also indicating that it is aggressively financing its assets with debt. The benefits are two-fold: This may mean that their earnings are/will be more volatile and at a higher risk of defaulting (going bankrupt), but also means a higher potential payout to the company’s investors and shareholders.

Total Debt to Total Asset Ratio Total liabilities Total assets Mathematical Definition: Total Liabilities divided by Total Assets. Conceptual Definition: This ratio is not much different from the Total Debt to Equity ratio. Essentially, it tells us what portion of the company’s assets is financed through debt. Benchmark: Industry average or “1”. If the ratio is above “1”, that would indicate that the majority of the company’s assets are financed through debt, while if the ratio is under “1”, than the company is primarily financed through equity. Notes:

• It is rare that a company has a ratio higher than “1”. Remember the basic accounting equation: Assets = Liabilities + Owner’s Equity. If the ratio is above “1”, this would mean the company has negative Owner’s Equity. If a company has negative Owner’s Equity, this probably means that their Retained Earnings account (which is part of Owner’s Equity) is negative; essentially, they’re losing money, so the company needs to compensate to keep itself afloat by using debt to finance its assets.

• Because most companies will not have a ratio higher than “1”, it makes sense to compare this ratio against the industry average.

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E FFICIENCY R ATIOS

Inventory Turnover Cost of good sold Average inventory

Mathematical Definition: Cost of Goods Sold divided by Average Inventory. Conceptual Definition: The Inventory Turnover tells us how many times a company has gone through, or “turned over”, its inventory during a specified time period, usually a year. It gives us an indication of how fast a company can sell its products. Benchmark: Industry average; Because this is more of a “performance” ratio, if you will, it is important to see how well the company is able to sell its inventory compared to its competitors, so using the industry average makes a nice benchmark. Naturally, the higher the ratio, the stronger the sales. A low ratio would possibly indicate poor sales. Notes:

• There is such a thing as too high of an Inventory Turnover. While a high ratio may mean strong sales, it may also mean our pricing strategy may give us little or no return.

Asset Turnover Revenue

Total asset

Mathematical Definition: Revenue divided by Total Assets. Conceptual Definition: This tells us how much revenue is generated for every $1 of assets. The higher the ratio, the more efficient the company is with its assets.

Benchmark: Industry average; as said above, because this is a “performance” ratio, it is important to see how the competitors, or the rest of the industry, is doing compared to yours. Accounts Receivable Turnover

RevenueAverage account receivables

Mathematical Definition: Revenue divided by the Average Accounts Receivables.

Conceptual Definition: Measures the firm’s ability to collect payment from its customers, ex. its ability to collect the cash from someone who paid by credit. A higher ratio indicates the firm’s efficiency in its ability to collect those payments, and/or the company operates more on a cash basis. A low ratio may mean that the company should possibly re-think its credit policies and find out why the firm cannot collect its customer’s payments on a timely fashion.

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PROFILE OF DABOUR INDIA LIMITED

INTRODUCTION TO DABUR INDIA LIMITED

Dabur India Limited is the fourth largest FMCG Company in India with interestsin Health care, Personal care and Food products. Building on a legacy of qualityand experience for over 100 years, today Dabur has a turnover of Rs.1536.95crore with powerful brands like Dabur Amla, Dabur Chyawanprash, Vatika,Hajmola & Real.

ORIGIN & GROWTH

The brief history and growth of Dabur India Ltd. in chronological order:

1884-The birth of Dabur in a small Calcutta pharmacy, where Dr. S.K. Burmanlaunches his mission of making health care products.1896-Setting up a manufacturing plant: With the growing popularity of Daburproducts, Dr. Burman expands his operations by setting up a manufacturingplant for mass productions of formulations.

Early 1900s-Dabur enters the specialized area of Nature based AyurvedicMedicines, for which standardized drugs are not available in the market.

1919-The need to develop scientific processes and quality checks for massproduction of traditional Ayurvedic medicines leads to establishment ofresearch laboratories.

1920-dabur expands further with new manufacturing units at Narendrapur andDaburgram. The distribution of Dabur products spreads to other states likeBihar and the North-East.

1936-dabur becomes a full fledged company- Dabur India(Dr. S. K. Burman) Pvt.Ltd.

1972-dabur’s operations shift to Delhi. A new manufacturing is set up intemporary premises in Faridabad, on the outskirts of Delhi.

1979-Commercial production starts in the Sahibabad factory of Dabur, one ofthe largest and best equipped production facilities for Ayurvedic medicines.

1986-Dabur becomes a Public Limited Company. Dabur India comes into beingafter reverse merger with Vidogum Limited.

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1992-beginning a new chapter of strategic partnerships with internationalbusinesses, Dabur enters into a joint venture with Agrolimen of Spain. This newventure is to manufacture and market confectionary items in India.

1993-dabur enters a specialized health care area of cancer treatment with itsoncology formulation plant at Baddi in Himachal Pradesh.

1994-Dabur India Ltd. raises its first public issue. Due to market confidence inthe Company, shares issued at a high premium are over subscribed 21 times.

1995-Extending its global partnerships, Dabur enters into joint ventures withOsem of Israel for food and Bongrain of France for cheese and other dairy products.

1996-For better operation and management, 3 separate divisions created according to their product mix- Health Care Products Division, Family Products Division and Dabur Ayurvedic Specialties Limited.

1997-Dabur enters full scale in the nascent processed foods market with the creation of the Foods Division. Project STARS(Strive to Achieve Record Successes ) is initiated to give a jump start to the company and accelerate its growth.

1998-With changing demands of business and to inculcate a spirit of corporate governance, the Burman family inducts professionals to manage the company. For the first tome in the history of Dabur, a non-family professional CEO sits at the helm of the Company.

2000-Dabur establishes its market leadership status with a turnover of 1,000 Crores. From a small beginning and upholding the values of its founder, Dabur now enters the august league of large corporate businesses.

2005-Dabur acquires Balsara’s hygiene and home product businesses in a Rs 143 crore all-cash deal.

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DABUR AT PRESENT Leading consumer goods company in India with 4th largest turnover ofRs.1536 Crores (FY04) 2 major strategic business units (SBU) - Consumer Care Division (CCD)and Consumer Health Division (CHD) 3 Subsidiary Group companies - Dabur Foods, Dabur Nepal and DaburInternational and 3 step down subsidiaries of Dabur International - AsianConsumer Care in Bangladesh, African Consumer Care in Nigeria andDabur Egypt. 13 ultra-modern manufacturing units spread around the globe Products marketed in over 50 countries Wide and deep market penetration with 47 C&F agents, more than 5000distributors and over 1.5 million retail outlets all over India Consumer Care Division: dealing with FMCG Products relating to PersonalCare and Health Care. Leading brands - Dabur - The Health Care Brand Vatika-Personal Care Brand Anmol- Value for Money Brand Hajmola- Tasty Digestive Brand and Dabur Amla, Chyawanprash and Lal Dant Manjan with Rs.100crore turnover each Vatika Hair Oil & Shampoo the high growth brand Strategic positioning of Honey as food product, leading to marketleadership (over 40%) in branded honey market Dabur Chyawanprash the largest selling Ayurvedic medicine with over65% market share. Leader in herbal digestives with 90% market share Hajmola tablets in command with 75% market share of digestive tabletscategory Dabur Lal Tail tops baby massage oil market with 35% of total share Real juices enjoy a market share of over 55% in fruit juice category.Consumer Health Division: dealing with classical Ayurved

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Vision of the company

“Dedicated to the health and well being of every house hold”

Mission of the company

within and outside India, and improve operational efficiencies by leveraging technology

Be the preferred company to meet the health and personal grooming needs of our target consumers with safe, efficacious, natural solutions by synthesizing our deep knowledge of ayurveda and herbs with modern science

Provide our consumers with innovative products within easy reach

Build a platform to enable Dabur to become a global ayurvedic leader

Be a professionally managed employer of choice, attracting, developing and retaining quality personnel

Be responsible citizens with a commitment to environmental protection

Provide superior returns, relative to our peer group, to our shareholders

.

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Board of Directors

Mr V C BurmanChairman

Dr Anand BurmanVice-Chairman

Mr Pradip BurmanDirector

Mr Amit BurmanDirector

Mr P D NarangDirector

Mr Sunil DuggalDirector

His Highness Maharaja Gaj SinghDirector

Mr R C BhargavaDirector

Mr P N VijayDirector

Mr Stuart Edward PurdyDirector

Mr A K JainAddl. GM (Finance) & Company Secretary

AuditorsM/s G. Basu & Co.Chartered Accountants

Internal AuditorsPrice Waterhouse Coopers Pvt. Ltd.

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Products & Services—

Dabur India is into business of manufacturing and selling of ayurvedic medicines, baby care, ayurvedic, natural and herbal personal and health products and processed foods either directly or indirectly through its subsidiaries. Dabur presents range of herbal and personal care products. Bringing together the gentle touch of nature and Ayurveda’s wisdom. Backed by the unfailing quality of Dabur Products. Hair oil, Fairness face pack, Shampoo, Tooth paste, red gel, lal dant manjan, dabur binaca toothbrush, vatika hair oil, anmol sarso aawla, vatika heena conditioning shampoo, vatika anti-dandruff shampoo. Instead of this in food range of REAL active natural juice, dabur homemade, dabur honey etc., are the few Successful brands of company. Dabur laid out a growth strategy -- new product introductions, brand extensions to new segments, and focus on new geographies. This strategy has paid rich dividends for Dabur and has delivered sales growth ahead of the consumer non-durable sector average. Balsara’s acquisition complements Dabur’s growth strategy as it provides entry to a new product segment (household care), extends Dabur’s oral care portfolio (‘white’ toothpaste), and improves its distribution muscle in Western and Southern India (focus areas for Dabur), as well as strengthening its international business because Balsara exports to Middle East markets where Dabur is trying to grow its business. In oral care, Balsara has a 6% market share and has three brands, Promise, Babool and Meswak based on herbal formulations. In the household care segment, Balsara’s product range includes air fresheners under the Odonil brand, insect repellant branded Odomos, toilet cleaners under the Sanifresh brand and dishwashers under the Odopic brand. All of these have fairly strong brand equity and Balsara has invested significantly behind these brands over the years. All these product segments have significant growth potential, owing to low penetration levels.

Leading brands - Dabur - The Health Care Brand

Vatika-Personal Care Brand

Anmol- Value for Money Brand

Hajmola- Tasty Digestive Brand

and Dabur Amla, Chyawanprash and Lal Dant Manjan with Rs.100 crore turnover each

Vatika Hair Oil & Shampoo the high growth brand

Strategic positioning of Honey as food product, leading to market leadership (over 40%) in branded honey market 

Dabur Chyawanprash the largest selling Ayurvedic medicine with over 65% market share.

Leader in herbal digestives with 90% market share

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Hajmola tablets in command with 75% market share of digestive tablets category

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Dabur’s international business is profitable and has operating margins only slightly below those of the domestic business. According to management, there is further potential for expanding margins for the international business. International operations have a footprint in 25 countries spread over six continents; however, a major part of its business is concentrated in the Middle East. The company also has four manufacturing facilities located in UAE, Bangladesh and Egypt. According to management, the company is looking to expand its presence in the Middle East, the Indian Subcontinent, Russia and Africa. For the developed markets in the US and Europe, Dabur is looking at alliances with distributors, focusing mainly on over-the counter herbal healthcare products. Key Risks· Competitive pressures from other FMCG companies and foreignplayers entering the Indian market, pose a threat to Company’s marketshare.· Strenghthening of Indian rupee is also a risk to our EPS estimates asDabur’s share from international business is increasing constantly

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ORGANISATION STRUCTURE

Organization structure is basic framework with in which the manager’s decision-making

behaviour takes place. The structure gives an established pattern of relationship among the various

components of an organization. It is a vital tool for providing information about organizational

relationships.

Dabur india Ltd. follows top to bottom chart, which is as follows

FUNCTIONAL DEPARTMENTS OF THE ORGANISATION

1. MARKETING

The marketing department takes care of the market development activities, network expansions, sales

and collections, and marketing accounts.

2. FINANCE AND ACCOUNTS

Finance and accounts department deals with corporate finance, account matters related to employees,

company infrastructure, investments and assets.

3. MATERIALS

The materials department arranges materials related to the product from various suppliers by

negotiating prices and ensuring quality.

4. PRODUCTION

This department takes care of the production and related activities to meet the target.

5. QUALITY

Quality department ensure material quality to deliver a finished goods for supply.

6. R & D

R & D will carry out research on new designs and carry out appropriate developments on the product

before certifying satisfactory performance to the management.

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CHAPTER – 2

REVIEW OF LITERATURE

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Review of Literature

Review of Literature refers to the collection of the results of the various researches relating to

the present study. It takes into consideration the research of the previous researchers which arerelated

to the present research in any way. Here are the reviews of the previous researches related with the

present study:

Bollen (1999)

conducted a study on Ratio Variables on which he found three different uses of  ratio

variables in aggregate data analysis: (1) as measures of theoretical concepts, (2) as a means to control

an extraneous factor, and (3) as a correction for hetero scedasticity. In the use of ratios as indices of

concepts, a problem can arise if it is regressed on other indices or variables that contain

a common component. For example, the relationship between two per capita measures

may be confounded with the common population component in each variable. Regarding

the second use of ratios, only under exceptional conditions will ratio variables be a suitable means

of controlling an extraneous factor. Finally, the use of ratios to correct for hetero scedasticity is also

often misused. Only under special conditions will the common form forgers soon with

ratiova r i a b l e s   co r r ec t   f o r   he t e ro sc edas t i c i t y .  A l t e rna t ive s   t o   r a t i o s   fo r   eac h  o f  

t he e   ca s e s   a r e discussed and evaluated.

Cooper (2000)

conducted a study on Financial Intermediation on which he observed that the quantitative

behavior of business-cycle models in which the intermediation process acts either as a source of

fluctuations or as a propagator of real shocks. In neither case do we find convincing evidence that

the intermediation process is an important element of aggregate fluctuation.

For an   econom y  d r iven  by   in t e rmed i a t i on   shoc ks ,   cons umpt i on   i s   no t   sm oo the r  

t han  ou tpu t , investment is negatively correlated with output, variations in the capital stock are quite

large, and interest rates are procyclical. The model economy thus fails to match unconditional

moments for t he U .S . e conom y . We a l so s t ruc tu r a l l y e s t im a te pa r ame te r s o f a

mode l econom y in w h ich intermediation and productivity shocks are present, allowing

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for the intermediation process to propagate the real shock. The unconditional correlations are

closer to those observed only when the intermediation shock is relatively unimportant.

CHAPTER – 3

RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY Resreach methodology is descriptive.

Using the ratios as a tool for doing the financial analysis of the dabur India ltd.

. To find the various data and figures required for this purpose, i have taken the

database and also the Annual Reports of Dabur India Limited of the past years. The

information was studied and analyzed to compute the relevant ratios

OBJECTIVES OF THE STUDY To. study the importance of ratio analysis.

To Present ratios to determine operational efficiency of the dabour India ltd.

To do the financial analysis of the dabour India ltd.

SCOPE OF THE STUDY The study of ratio analysis is limited to the specific company, dabour India ltd.

The study period covered in this case study is for 3 financial years i.e., from 2005-2006, 2006-

2007, 2007-2008,

LIMITATIONS OF STUDY 1.This report is based on the annual reports, which are provided by the company that cannot be

relied upon.

2.The collection of data for analysis is restricted to Dabour india. Ltd. only and

3.Time was major limiting factor to the study.

DATA COLLECTION TOOLS .

Secondary Data:Secondary data was collected mainly from various sources which includes financial journals,

other published textbooks and various web sites. And comparative balance sheets and Ratio analysis.

Interpretations of the result as been done on graphical representation through bar graphs.

30

CHAPTER -4

DATA ANALYSIS AND

INTERPRETATION

31

ANALYSIS OF RATIOS OF DABUR INDIA LTD. The significant accounting policies followed by Modern Collections Pvt. Ltd. are as follows;

SIGNIFICANT ACCOUNTING POLICIES

Basis of preparing financial statements

The financial statements of Dabur india Ltd. are prepared under the historical cost convention on an

accrual basis.

Fixed assets

Fixed assets are stated at their original cost of acquisition and subsequent improvement thereto,

including taxes, duties, freight and other incidental expenses related to acquisition, construction and

installation of asset(s) concerned.

Depreciation

Depreciation on fixed assets is provided at rates prescribed on written down value basis in schedule

XIV of the companies’ act of 1956 on a prorata basis from the date of acquisition of the asset.

Inventories

Inventories are valued at lower of cost or net realizable value. Cost is determined on first in first out

basis and includes an appropriate portion of production and factory related overheads

Long-term investments

Long-term investments are accounted at cost, and no provision has been made for dimunition in the

value of the same.

Foreign exchange transactions

Foreign exchange transactions are dealt with in accordance with the accounting standards on

accounting for effects of changes in foreign exchange rates (AS11) issued by institute of chartered

accountant of India.

32

Gratui\ty

Provision of gratuity is made on an estimated basis as per the provision of the payment of gratuity act

1972.

Research and development

Research and development expenditure is charged to profit and loss account in the year of incurrence.

Fixed assets acquired for the purpose of research and developments are capitalized.

Share capital

Out of the equity shares issued, 15000 shares of Rs.100 each were allotted as fully paid up.

The current assets and current liabilities of Modern Collections Pvt. Ltd. are given below.

CURRENT ASSETS

INVENTORIES

Raw materials and packing materials.

Work in progress.

Finished goods.

Finished goods in transit.

Packing material.

Scrap.

SUNDRY DEBTORS (unsecured considered good)

Debts outstanding for a period exceeding 6 months

Others

CASH AND BALANCES

Current account with scheduled banks.

Current account with deutsche bank.

Margin deposit account.

33

Cash in hand.

LOANS AND ADVANCES (unsecured considered good)

Advances receivable in cash or kind.

Deposits.

CURRENT LIABILITIES AND PROVISIONS

CURRENT LIABILITIES

Sundry creditors.

Advance from customers.

Liability for expenses.

PROVISIONS

For taxation (net of Advance income tax).

For gratuity.

For leave encashment.

THREE YEARS FINANCIAL REPORT OF DABUR INDIA LTD

As on( Months ) 31-Mar-11(12)   31-Mar-10(12)   31-Mar-09(12)  Profit / Loss A/C Rs mn %OI Rs mn %OI Rs mn %OINet Sales 20820.38 99.17 15987.46 99.56 12310.53 99.71Operating Income (OI) 20995.09 100.00 16057.81 100.00 12346.09 100.00OPBDIT 3965.99 18.89 3076.49 19.16 2417.99 19.59OPBDT 3880.54 18.48 3032.18 18.88 2361.40 19.13OPBT 3566.34 16.99 2747.47 17.11 2128.32 17.24Non-Operating Income 85.42 0.41 94.76 0.59 15.24 0.12

Extraordinary/Prior Period -0.68 -0.00 28.85 0.18 -32.02 -0.26

Tax 491.93 2.34 351.65 2.19 218.60 1.77Profit after tax(PAT) 3159.16 15.05 2519.42 15.69 1892.94 15.33Cash Profit 3473.36 16.54 2804.14 17.46 2126.02 17.22

Dividend-Equity 1296.02 6.17 1221.25 7.61 1003.23 8.13

34

Balance Sheet As on 31-Mar-08   31-Mar-07   31-Mar-06Assets Rs mn %BT Rs mn %BT Rs mn Gross Block 4483.44 39.68 3874.81 50.24 3172.65Net Block 2665.22 23.59 2244.18 29.10 1784.42Capital WIP 162.64 1.44 37.07 0.48 130.69Investments 677.31 5.99 657.31 8.52 2342.08Inventory 2011.47 17.80 1573.69 20.40 1156.09Receivables 1004.64 8.89 609.79 7.91 269.43Other Current Assets 4778.49 42.29 2590.55 33.59 1839.98Balance Sheet Total(BT) 11299.79 100.00 7712.59 100.00 7522.68Liabilities Rs mn %BT Rs mn %BT Rs mn Equity Share Capital 864.02 7.65 862.88 11.19 573.30Reserves 4163.25 36.84 2861.66 37.10 3503.38Total Debt 173.37 1.53 200.80 2.60 205.75Creditors and Acceptances 3129.61 27.70 2713.57 35.18 1913.95Other current liab/prov. 2969.53 26.28 1073.68 13.92 1326.30Balance Sheet Total(BT) 11299.79 100.00 7712.59 100.00 7522.68

Ratio Analysis As on 31-Mar-08 31-Mar-07OPBIT/Prod.cap.empl.(%) 156.44 114.66PBIT/Cap. Employed (%) 74.17 74.98PAT/Networth (%) 62.84 67.64Tax/PBT (%) 13.47 12.25Total Debt/Networth (x) 0.03 0.05Long Term Debt/Networth (x) 0.01 0.01PBDIT/Finance Charges (x) 47.40 72.24Current Ratio (x) 1.28 1.26RM Inventory (days consumption) 44.00 43.39FG inventory (days cost of sales) 16.92 18.58Receivables (days gross sales) 17.33 13.61Creditors (days cost of sales) 67.08 76.30Op. curr. assets (days OI) 96.00 88.00

Share Statistics

As on 31-Mar-08 31-Mar-07 31-Mar-06EPS (Rs.) 3.66 2.92CFPS (Rs.) 4.02 3.25Book Value (Rs.) 5.82 4.32DPS (Rs.) 1.50 1.42

35

ANALYSIS OF THE RATIOS OF DABUR INDIA LTD

CURRENT RATIO

Current ratio may be defined as the relationship between current assets and current liabilities.

This ratio is also known as working capital ratio. It is calculated by dividing the total current assets by

total current liabilities.

Current Assets

Current ratio = -------------------------

Current Liabilities

Current assets include cash in hand, cash at bank, bills receivable, sundry debtors, inventory,

prepaid expenses, outstanding incomes temporary investments and advances. Current liabilities

include bills payable, sundry creditors, bank overdraft, unclaimed dividend, outstanding

expenses, provision for taxation and proposed dividend etc.

TABLE – 01

TABLE SHOWING CURRENT RATIO

Source: Secondary Data

Year Current Ratio

2005-2006 1.01

2006—2007 1.26

2007-2008 1.28

36

INFERENCE

The current ratio increases to 0 .25 in the year 2007-2008 , when compared to the year 2005-

2006, and again it is increased to 0 .2 in 2007-2008,. This shows that there is improvement in the

short-term solvency of the company.

GRAPH – 01

GRAPH SHOWING CURRENT RATIO

37

ACID TEST RATIO

Acid test ratio may be defined as the relationship between liquid assets and liquid liabilities. It is also

known as liquid ratio or quick ratio. Liquid assets include all current assets except inventory and

prepaid expenses. Liquid liabilities include all current liabilities except bank overdraft.

Liquid Assets

Acid test ratio = ----------------------------

Liquid liabilities

TABLE – 02

SHOWING THE LIQUID RATIO

Year Liquid assets Liquid liabilities Liquid ratio

2005-2006 17367308 10004325 1.73

2006-2007 23362359 21128392 1.10

2007-2008 15428377 11339964 1.36

Source: Secondary Data

INFERENCE

The liquid ratio is decreased to 1.10 in the year 2006-2007 when compared to the previous year 2005-

2006, and again it is increased to 1.36 in the year 2007-2008. This further confirms that there are

fluctuations in the short-term liquidity of the company.

38

GRAPH – 02

GRAPH SHOWING LIQUID RATIO

39

ABSOLUTE LIQUID RATI0

Absolute liquid ratio may be defined as the relationship between Absolute liquid assets and liquid

liabilities. Absolute liquid assets include cash in hand, cash at bank and marketable securities.

The absolute liquid ratio can be calculated by dividing absolute liquid assets by liquid liabilities. Thus,

Absolute liquid assets

Absolute Liquid Ratio = ---------------------------------

Liquid liabilities

TABLE – 03

SHOWING ABSOLUTE LIQUID RATIO

Year Liquid Assets Liquid Liabilities Absolute Liquid Ratio

2005-2006 22720507 10004325 2.27

2006-2007 23493785 21128392 1.11

2007-2008 18659035 11339964 1.64

INFERENCE

The absolute liquid ratio is decreased to 1.64 when compared to 1.11 in the year 2006-2007, but again

it shows a rise in the year 2007-20048which stands at 0.71

40

GRAPH – 03

GRAPH SHOWING ABSOLUTE LIQUID RATIO

41

LONG TERM SOLVENCY RATIO

DEBT-EQUITY RATIO

Debt-Equity Ratio, also known as External-Internal Equity ratio is calculated to measure the relative

claims of outsiders and owners against the firm’s assets. The Debt-Equity ratio can be calculated by

dividing the total Debts by equity. Thus,

Total debts

Debt-Equity ratio = ----------------------

Equity

A total debt equals all long term debts plus current liabilities and provisions and equity includes

share capital, reserves and surplus minus capital losses

TABLE – 04

TABLE SHOWING DEBT-EQUITY RATIO

Year Total debt Equity Debt-Equity Ratio

2005-2006 62072358 28620421 2.16

2006-2007 74357442 28416205 2.61

2007-2008 55024148 28057713 1.96

Source: Secondary Data

42

INFERENCE

Debt equity ratio has increased to 2.61 in 2006-2007 when compared to 2005-2006and again it is

decreased to 1.96 in the year 2007-2008 though it was decreased to 1.96 in the year 2007-2008 . 7This

shows that there is no improvement in the long-term solvency position of the company.

GRAPH- 04

GRAPH SHOWING DEBT-EQUITY RATIO

43

PROPRIETORY RATIO

The ratio that expresses the relationship between proprietor’s fund and total assets is called Proprietory

ratio. This ratio can be calculated as under.

Equity

Proprietory Ratio = ----------------------

Total Asset

TABLE – 05

TABLE SHOWING PROPRIETORY RATIO

Year Equity Total Assets Proprietory Ratio

2005-2006 28620421 52068033 0.54

2006-2007 28416205 53229050 0.53

2007-2008 28057713 43684184 0.64

Source: Secondary Data

INFERENCE

This ratio is decreased in the year 2006-2007 to 0.53 when compared to 2005-2006 and further

increased to 0.64 in the year 2007-2008 when compared to 2006-2007. this shows that there is an

increase in the long-term solvency of the business.

44

GRAPH - 05

TABLE SHOWING PROPRIETORY RATIO

45

FIXED ASSETS TO NETWORTH RATIO

The ratio, which establishes the relationship between fixed assets and shareholder’s funds, is called

fixed assets to Net worth ratio. This ratio can be calculated as follows

Fixed Assets (After depreciation)

Fixed assets to Net worth Ratio = -------------------------------------

Shareholder’s funds

TABLE – 06

TABLE SHOWING FIXED ASSETS TO NETWORTH RATIO

Year Fixed Asset Net worth Fixed assets to

Net worth Ratio

2005-2006 6335879 28620421 0.55

2006-2007 6079307 28416205 0.49

2007-2008 5378748 28057713 0.59

Source: Secondary Data

INFERENCE

The ratio of fixed assets to net worth ratio is found to be fluctuating in the year 2006-2007. But it is

slightly increased in the year 2007-2008.

46

GRAPH – 06

GRAPH SHOWING FIXED ASSETS TO NETWORTH RATIO

47

CAPITAL GEARING RATIO

Capital gearing ratio is a ratio, which expresses relationship between fixed interest and dividend

bearing securities and equity share capital. This ratio is calculated as follows.

Fixed interest and dividend bearing

Securities

Capital Gearing Ratio = --------------------------------------------

Equity share capital

TABLE – 08

TABLE SHOWING CAPITAL GEARING RATIO

Year

Fixed interest and

dividend bearing

securities

Equity share capital Capital gearing

ratio

2005-2006 1627673 1500000 1.08

2006-2007 1528950 1500000 1.01

2007-2008 1548490 1500000 1.03

Source: Secondary Data

INFERENCE

Capital gearing ratio is decreasing in the year 2006-2007 and but it has increased in 2007-2008

48

GRAPH - 08

GRAPH SHOWING CAPITAL GEARING RATIO

ACTIVITY RATIOS

49

INVENTORY TURNOVER RATIO

Inventory turnover ratio is the ratio, which indicates the number of times the stock is

turned over i.e., sold during the year. In other words, it is the ratio between the cost of goods sold and

closing stock. This ratio can be calculated as follows.

Sales

Stock Turnover Ratio = -- Inventory --------------

TABLE – 09

TABLE SHOWING INVENTORY TURNOVER RATIO

Source: Secondary Data

INFERENCE

Inventory turn over ratio has decreased to 2.20 in the year 2006-20027when compared to 2005-2006

and again increased in the year 2007-2008 to 1.57 .

Year Stock turnover

Ratio

2005-2006 6.48

2006-2007 4.88

2007-2008 5.57

50

GRAPH – 09

GRAPH SHOWING INVENTORY TURNOVER RATIO

DEBTORS TURNOVER RATIO

Debtors turnover rate is in between credit sales and debtors. In other words, it indicates the number of

times the debts are collected in a year. This ratio is calculated as follows.

Credit Sales

Debtors Turnover Ratio = -----------------------

Debtors

51

TABLE - 10

TABLE SHOWING DEBTORS TURNOVER RATIO

Source: Secondary Data

INFERENCE

The debtors turn over ratio has decreased to 4.09 in the year 2006-2007 and again has increased to

15.15 in the year 2007-2008

Year Credit Sales Debtors Debtors

Turnover Ratio

2005-2006 82298796 5239150 15.70

2006-2007 48397521 11818945 4.09

2007-2008 62649553 4174430 15.0

52

GRAPH – 10

GRAPH SHOWING DEBTORS TURNOVER RATIO

Debtors Turnover Ratio

0246

81012141618

2005-2006 2006-2007 2007-2008

Debtors TurnoverRatio

53

CREDITORS TURNOVER RATIO

Creditors turnover ratio is the ratio, which indicates the number of times the debts are paid in the year.

This ratio is calculated as follows.

Credit purchase

Credit Turnover Ratio = ---------------------

Average creditors

TABLE -12

TABLE SHOWING CREDITORS TURNOVER RATIO

Year Credit purchase Creditors Creditors turn over

Ratio

2005-2006 44491045 4776658 9.31

2006-2007 25501189 12827919 1.98

2007-2008 32984848 7452623 4.42

Source: Secondary Data

INFERENCE

The creditors turnover ratio has decreased to 1.98 in 2006-2007 when compared to 2007-2008 and

again it is increased to 4.42 .

54

GRAPH – 12

GRAPH SHOWING CREDITORS TURNOVER RATIO

Creditors turn over Ratio

0123456789

10

2005-2006 2006-2007 2007-2008

Creditors turn overRatio

55

DEBT PAYMENT PERIOD RATIOS

Debt payment ratio is a ratio, which shows the average time taken by the firm to repay the debt. This

ratio is calculated as follows.

Creditors

Debt payment period ratio = ------------------ * 365 Days

Credit purchase

TABLE – 13

TABLE SHOWING DEBT PAYMENT PERIOD RATIO

Year Creditors Credit purchases Debt payment

period Ratio

2005-2006 4776658 44491045 39 Days

2006-2007 12827919 25501189 184 Days

2007-2008 7452623 32984848 82 Days

Source: Secondary Data

INFERENCE

The debt payment period increased to 184 days in 2005-2006 and also in the year 2006-2007 to 105

days when compared to 39 days in the year 2005-2006,

56

GRAPH – 13

GRAPH SHOWING DEBT PAYMENT PERIOD RATIO

0

0.2

0.4

0.6

0.8

1

1.2

2007-2008 82days

2006-2007 184days

2005-2006 39days

years debt paymet period ratio

Series1

57

FIXED ASSETS TURNOVER RATIO

The ratio, which expresses the relationship between the sales and total assets, is known as Fixed assets

turnover ratio.

Sales

Fixed assets turnover ratio = ------------------

Fixed Asset

TABLE – 14

TABLE SHOWING FIXED ASSETS TURNOVER RATIO

Year Sales Fixed Assets Fixed assets turn

over Ratio

2005-2006 12310.53 7522.68 1.637

2006-2007 15987.46 7712.59 2.07

2007-2008 20820.38 11299.79 1.84

Source: Secondary Data

INFERENCE

Fixed assets turnover ratio has inecreased to 2.07 in the year 2005-2006 when compared to 2005-

20016and then decreased become more or less equal to 2005-2007 in 2007-2008..

58

GRAPH – 14

GRAPH SHOWING FIXED ASSETS TURNOVER RATIO

59

CURRENT ASSETS TURNOVER RATIO

The ratio, which expresses the relationship between the current assets to sales, is called as Current

assets turnover ratio. It is calculated as follows.

Sales

Current Assets Turnover Ratio = -------------------

Current Assets

TABLE – 15

TABLE SHOWING CURRENT ASSETS TURNOVER RATIO

Year Current assets turn

over Ratio

2005-2006 1.63

2006-2007 2.07

2007-2008 1.84

Source: Secondary Data

INFERENCE

The current assets turnover ratio has increased to .44 in 2006-2007 but decreased in the year 2007-

2008 to .23 when compared to the previous year 2006-2007

60

GRAPH – 15

GRAPH SHOWING CURRENT ASSETS TURNOVER RATIO

current asset turnover ratio

0

0.5

1

1.5

2

2.5

2005-2006 2006-2007 2007-2008

current assetturnover ratio

61

WORKING CAPITAL TURNOVER RATIO

The ratio, which expresses the relationship between the working capital and sales, is called as

Working capital turnover ratio. It is calculated as follows

Sales

Working capital turnover ratio = --------------------

Working capital

TABLE – 16

TABLE SHOWING WORKING CAPITAL TURNOVER RATIO

Year Sales Working capital Working capital

turn over ratio

2005-2006 82298796 25813153 3.18

2006-2007 48397521 24678966 1.96

2007-2008 62649553 21588683 2.90

Source: Secondary Data

INFERENCE

Working capital turnover ratio has decreased to 1.96 in 2006-2007 when compared to 2005-2006 and

again it is further increased to 2.90 when compared to that of the year 2006-2007 .

62

GRAPH – 16

GRAPH SHOWING WORKING CAPITAL TURNOVER RATIO

63

PROPRIETORY FUND TURNOVER RATIO

This is a ratio, which expresses the relationship between the proprietory fund and sales, is called as

Proprietory fund turnover ratio. It is calculated as follows.

Sales

Proprietory fund turnover ratio = ---------------------

Proprietory fund

TABLE –17

TABLE SHOWING PROPRIETORY FUND TURNOVER RATIO

Year Sales Equity Proprietory fund

turn over Ratio

2005-2006 12310.53 864.02 14.24

2006-2007 15987.46 862.88 18.52

2007-2008 20820.38 573.30 36.31

Source: Secondary Data

INFERENCE

This ratio has increased to 18.52 in 2006-2007 and it increased double from 2005-2006 when

compared to 2007-2008 .

64

GRAPH – 17

SHOWING PROPRIETORY FUND TURNOVER RATIO

Proprietory fund turn over Ratio

0

5

10

15

20

25

30

35

40

2005-2006 2006-2007 2007-2008

Proprietory fund turnover Ratio

65

PROFITABILITY RATIOS

Profitability ratios are calculated to determine the operating efficiency of the company. Profit is the

difference between total revenues and expenses over a period of time. It is the ultimate output of the

company without which the company has no future. Therefore, the financial manager should

continuously evaluate efficiency of the company on terms of profits. Profitability ratios can be

determined on the basis of sales or in relation to investments. Generally, two major types of

profitability ratios are calculated.

Profitability in relation to sales.

Profitability in relation to investment.

PROFITABILITY IN RELATION TO SALES

Generally, the following profitability ratios are calculated in relation to sales

GROSS PROFIT RATIO

Gross profit ratio, is the ratio which expresses the relationship between gross profit and sales

expressed in percentage. It is calculated as follows.

Gross profit

Gross profit ratio = ----------------------- * 100

Sales

66

TABLE – 18

TABLE SHOWING GROSS PROFIT RATIO

Year Gross profit Sales Gross profit Ratio

2005-2006 11892.94 12310.53 9.67

2006-2007 2519.42 15987.46 15.75

2007-2008 3159.16 20820.38 15.17

Source: Secondary Data

INFERENCE

Gross profit ratio has increased in the year 2006-2007 to 6.92% having profits in the year 2006-2007

and shows a fall in 2007-2008 to .08%.

67

GRAPH – 18

GRAPH SHOWING GROSS PROFIT RATIO

68

gross profit ratio

02468

1012141618

2005-2006 2006-2007 2007-2008

gross profit ratio

NET PROFIT RATIO

It is the ratio, which expresses the relationship between net profit and sales expressed in percentage. It

is calculated as follows.

Net profit

Net profit ratio = ------------------- * 100

Sales

TABLE – 19

TABLE SHOWING NET PROFIT RATIO

Year Net profit Sales Net profit Ratio

2005-2006 1892.94 12310.53 0.153%

2006-2007 2519.42 15987.46 0.157%

2007-2008 3159.16 20820.38 0.151%

Source: Secondary Data

INFERENCE

The net profit ratio has increase in the year 2006-2007 bt decrease to 0.151 hprofit in the immediate

previous years when compared to that of profits of 2006-2007 to 0.61%. This shows there is decline in

the profitability of the company.

69

GRAPH – 19

GRAPH SHOWING NET PROFIT RATIO

.

70

OPERATING RATIO

The ratio, which expresses the relationship between operating cost and sales expresses in percentage,

is called as Operating ratio. This ratio is calculated as follows.

Operating cost

Operating ratio = ------------------------ * 100

Sales

TABLE – 20

TABLE SHOWING OPERATING RATIO

Year Operating cost Sales Operating Ratio

2005-2006 24171616 82298796 29.37%

2006-2007 15647946 48397521 32.33%

2007-2008 11102218 62649553 17.72%

Source: Secondary Data

INFERENCE

The operating ratio in the year 2006-2007 increased to 32.33% when compared to 2005-2006. But it is

decreased in the year 2007-2008 to 17.72% . So this is the reason for decline in the net profit of the

company.

71

GRAPH – 20

GRAPH SHOWING OPERATING RATIO

72

OPERATING PROFIT RATIO

The ratio, which expresses the relationship between operating profit and sales expressed in percentage,

is called as Operating profit ratio. It is calculated as follows.

Operating profit cost

Operating profit ratio = ---------------------------- * 100

Sales

TABLE – 21

TABLE SHOWING OPERATING PROFIT RATIO

Year Operating profit Sales Operating profit

Ratio

2005-2006 1400467 82298796 1.70%

2006-2007 39457 48397521 0.08%

2007-2008 3463897 62649553 5.52%

Source: Secondary Data

INFERENCE

The operating profit ratio has increased to 5.52% in the year 2007-2008 when compared to both the

previous years, 2005-2006and 2007-2008.

.

73

GRAPH – 21

GRAPH SHOWING OPERATING PROFIT RATIO

operating profit ratio

0

1

2

3

4

5

6

2005-2006 2006-2007 2007-2008

operating profit ratio

74

PROBABILITY IN RELATION TO INVESTMENT

RETURN ON PROPRIETOR’S FUND

The ratio between net profit after tax and proprietor’s fund is called return on proprietor’s fund. It is

calculated as follows.

Net profit after tax

Return on proprietor’s fund = ------------------------ *100

Equity

TABLE – 22

TABLE SHOWING RETURN ON PROPRIETOR’S FUND

Year Equity Profit after tax Return on

proprietor’s fund

2005-2006 573.30 1892.94 3.30

2006-2007 862.88 2519.42 2.91

2007-2008 864.02 3159.16 3.65

Source: Secondary Data

INFERENCE

The ratio of return on proprietor’s fund has increased to 20.44.% when compared to 2007-2008 as it

has decreased in 2006-2007.

75

GRAPH SHOWING RETURN ON PROPRIETOR’S FUND

76

RETURN ON TOTAL RESOURCES

The ratio between net profit after tax and total assets is called as Return on total resources. It is

calculated as follows.

Net profit after tax

Return on total resources = ------------------------- * 100

Total assets

TABLE – 23

TABLE SHOWING RETURN ON TOTAL RESOURCES

Year Net profit after tax Total assets Return on total

resources

2005-2006 1892.94 7522.68

25.16

2006-2007 2519.42 7712.59 32.67

2007-2008 3159.16 11299.79 27.95

Source: Secondary Data

INFERENCE

The return on total resources increased to 7.51% in the year 2006-2007 decereasd in the year 2007-

2008 and when compared to that of 2006-2007.

77

GRAPH – 23

SHOWING RETURN ON TOTAL RESOURCES

78

RETURN ON CAPITAL EMPLOYED

The ratio between net profit before interest and tax and capital employed is called as return on capital

employed. It calculated as followed

Net profit before tax

Return on capital employed = ---------------------------- * 100

Capital employed

TABLE – 24

TABLE SHOWING RETURN ON CAPITAL EMPLOYED

Year Return on capital

employed

2005-2006 52.22

2006-2007 74.98

2007-2008 74.17

Source: Secondary Data

INFERENCE

The return on capital employed ratio shows very low return on capital employed in the year 2005-

2006 as compared to 2006-2007and 2007-2008 because of losses incurred by the company in that

year. In the next year it reaches to 2.94% which is more when compared to the one in the year 2007-

2008.

79

GRAPH - 24

GRAPH SHOWING RETURN ON CAPITAL EMPLOYED

80

EARNING PER SHARE (EPS)

The ratio between net profit after tax and number of equity shares is called as Earning per share.

Net profit after tax

Earning per share = ------------------------------- * 100

Number of equity shares

TABLE – 25

TABLE SHOWING EARNING PER SHARE (EPS)

Year Number of equity

shares

Profit after tax Earnings per share

2005-2006 573.30 1892.94 3.30

2006-2007 862.88 2519.42 2.92

2007-2008 864.02 3159.16 3.66

Source: Secondary Data

INFERENCE

The earnings per share have decreased to 2.92in the year 2006-2007 but then increases to 3.66 in

2007-2008.

81

GRAPH – 25

S

GRAPH SHOWING EARNING PER SHARE (EPS)

82

CHAPTER – 5

FINDINGS

83

FINDINGS

The analysis and interpretation of the data gathered, has revealed the following facts:

The current ratio of the company has been increasing from year to year but not as much as it

should be so the company is not able to meet the standard of 2:1 it represents that the

company’s short-term liquidity position is not so much satisfactory.

The debt equity ratio is increased to 2.61 in 2006-2007 when compared to 2005-2006, and gain

in the year 2007-2008 it is increased to 2.31 . This shows that there is an improvement in the

long-term solvency position of the company.

Current assets to net worth ratio show a rising trend in all the years.

The working capital turn over ratio has decreased to 1.96 in the year, but from there on it has

kept on increasing in the future.

Gross profit ratio has increased in the year 2006-2007 and shows a fall in 2007-2008

The net profit ratio has increased in the year 2006-2007 to 0.02% having no profit in the

immediate previous years when compared to that of profits of 2007-2008 to 0.61%. This shows

there is decline in the profitability of the company.

The operating ratio in the year 2006-2007 increased to 32.33% when compared to 2005-2006.

But it is increased in the year 2007-20048to 23.38% So this is the reason for decline in the net

profit of the company

84

The ratio of return on proprietor’s fund has increased to 20.44.% when compared to 2006-2007

having no return on proprietor’s fund because of no profits in the year 2006 and 2007 when

compared to 2005-2006 having 4.74%. This is because of decline in the profitability due to

more operating cost.

The return on capital employed ratio shows return are increasing on capital employed in the

year 2006-2007 as compared to the 2006-2007 butin the 2007-2008 it fll down from 2006-

2007.

The earnings per share have decreased to 13.01% in the year 2006-2007 but then it increases to

20.23% in 2007-2008

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CHAPTER – 6

CONCLUSION

AND

SUGGESTIONS

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CONCLUSION

Accounting ratio indicate the trend of business.The trend is useful for estimating future with

the help of previous year’s ratio estimates for future can be made.in this way the ratio provide

the basis for preparing budgets and also determining future line of action.

The Debt to Equity ratio and the capital Gearing ratio of the company is almostnegligible implies that most of the liabilities of the company are short term and company is in fairly good position to meet itslong term liabilities. This means that the creditors of the company face very lowrisk of losing their money.

· The total Debts/ Total Assets is also negligible which suggests that the companyhas a lot of Assets to pay off the debt

The long-term solvency position of the company has shown a recurrent increase. They indicate

the company’s ability to meet its long term liability.

The operating Margin and net profit margin are constantly risingover the period of 3 years, which means that the company is becoming more andmore efficient in terms of its operations

The company has very efficiently and effectively utilizedits resources in order to generate increasing returns continuously.

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SUGGESTIONS

Dabur India ltd should make proper financial planning so that the available funds are utilized

in more efficient and effective manner.

The company must try to maintain its short-term liquidity position, by investing only in those

investments, which are easily convertable into cash.

Dabur India ltd must cut down the operating and other expenses with out reducing the quality

of its products.

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CHAPTER – 7

BIBLIOGRAPHY

89

BIBLIOGRAPHY

Books Arnold, G. (2002). Corporate Financial Management. Harlow: Pearson Education

Limited.

Benninga, S., Helmantel, M., Sarig, O. (2003). , Journalof Financial Economics, 75(1), 115-132

. Brealey, R. & Myers, S. (2003). Principles of Corporate Finance. New York: McGraw-

Hill.

Financial management (2003) By. S.K.R. Paul

Financial Management Theory & (2002) By. Prasanna Chandra

Practice Tata Mc Graw Hill

Publishing Company Limite

JOURNALS & MAGAZINES

Annual reports of Dabur india. Ltd..

Business Standard,

WEB SITE

http://www.dabur.com/

http://www.dabur India limited.com/

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