A Project Report on AN Analysis & Comparative Study of Financial Statements For Dabur India Ltd.

Submitted to Punjab Technical University, Punjab

Submitted by Rakesh Pawar Academy of Management & Professional Development, Thane

Sr.No 1 2 3 4 5 6 7 8

Contents Topic Executive Summery Objective & Scope of Project Company Profile Theoretical Background Research Methodology Ratio Analysis & Presentation Comparative Analysis with same industry Group Conclusion

Page No. 1

EXECUTIVE SUMMERY This project named an Analysis and Comparative study of financial statements was carried out on Dabur India Ltd. To analyze and understand financial feasibility of the company in terms of liquidity, turnover, solvency, Profitability etc. by using ration analysis method. I choose this project to do on Dabur India Ltd because it is a leading manufacturer of consumer goods having 5300 crore turnover in Fy12.Dabur India Ltd. Was established in 1884 with a small unit to manufacture health care products. Its innovating & producing new consumer health products which will help to every individual. There vision is Dedicated to Health and well being of every Household

The Ratio Analysis technique is the process of identifying the financial strength and weakness of the firm by properly establishing relationship between the items of the balance-sheet and the profit and loss account because the figures recorded in the financial statements are absolutely incapable of revealing the soundness or otherwise of a Company s financial position or performance. Thus the technique of Ratio Analysis has been used which is supposed to be powerful tool for financial statements. In Ratio Analysis a ratio is used as benchmark for evaluating the Financial position and performance of the firm.

OBJECTIVES To obtain to Insight into financial position of the company To make comparative study of Financial statements of different year To draw correct picture of the financial options of the company in terms of liquidity, solvency etc To make comparative with the same industry group companies e.g. HUL To find out the reason for unsatisfactory results.

COMPANY PROFILE About Dabur History & Milestones in Companys growth 1884 Dr. SK Burman started an Ayurvedic Pharmacy in Kolkatta 1994 Listed on the Bombay stock Exchange 2004 International Business set up in Dubai to tap overseas opportunity 2008 Acquired Fem Care Pharma entering 1972 The company shifted base to Delhi from Kolkata 1998 Professionalized with Burman Family handing over day to Management 2005 Acquired Balsara strengthening Oral care & gaining entry into Home care 2010 Overseas acquisitions Hobi Group, Turkey and Namaste Laboratories, US 1986 Registered as Public Limited Company 2003 Pharmaceutical Business De-merged to focus on core FMCG business 2006 Dabur Figured in Top 10 Great Places To Work 2012 Crossed Rs. 50 bn mark in annual revenues and market Cap of c.US$4 billion.

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Dabur India Limited has marked its presence with significant achievements and today commands a market leadership status. The story of success is based on dedication to nature, corporate and process hygiene, dynamic leadership and commitment to partners and stakeholders. The result of companys policies & initiatives speaks for themselves.

Leading consumer goods company in India with a turnover of Rs. 5,283 Crore (FY12) 2 major strategic business units (SBU) - Consumer Care Business and International Business Division (IBD) 2 Subsidiary Group companies - Dabur International and NewU and several step down subsidiaries: Dabur Nepal Pvt Ltd (Nepal), Dabur Egypt Ltd (Egypt), Asian Consumer Care (Bangladesh), Asian Consumer Care (Pakistan), African Consumer Care (Nigeria),Naturelle LLC (Ras Al Khaimah-UAE), Weikfield International (UAE) and Jaquline Inc. (USA)

17 ultra-modern manufacturing units spread around the globe Products marketed in over 60 countries Wide and deep market penetration with 50 C&F agents, more than 5000 distributors and over3.4 million retail outlets all over India

Consumer Care Business addresses consumer needs across the entire FMCG spectrum through four distinct business portfolios of Personal Care, Health Care, Home Care & Foods

Master brands: Dabur - Ayurvedic healthcare products Vatika - Premium hair care Hajmola - Tasty digestives Ral - Fruit juices & beverages Fem - Fairness bleaches & skin care products 12 Billion-Rupee brands: Dabur Amla, Dabur Chyawanprash, Vatika, Ral, Dabur Red Toothpaste, Dabur Lal Dant Manjan, Babool, Hajmola, Dabur Honey, Glucose, Fem and Odonil Strategic positioning of Honey as food product, leading to market leadership (over 75%) in branded honey market Dabur Chyawanprash the largest selling Ayurvedic medicine with over 65% market share. Vatika has been the fastest growing hair care brand in the Middle East Hajmola tablets in command with 60% market share of digestive tablets category. About 2.5 crore Hajmola tablets are consumed in India every day Leader in herbal digestives with 90% market share Consumer Health Division (CHD) offers a range of classical Ayurvedic medicines and Ayurvedic OTC products that deliver the age-old benefits of Ayurveda in modern ready-to-use formats

Has more than 300 products sold through prescriptions as well as over the counter Major categories in traditional formulations include: - Asav Arishtas - Ras Rasayanas - Churnas - Medicated Oils Proprietary Ayurvedic medicines developed by Dabur include: - Nature Care Isabgol - Madhuvaani - Trifgol Division also works for promotion of Ayurveda through organised community of traditional practitioners and developing fresh batches of students

International Business Division (IBD) caters to the health and personal care needs of customers across different international markets, spanning Nepal, Bangladesh, the Middle East, North & West Africa, EU and the US with its brands Dabur & Vatika

Contributes to about 30% of total sales Leveraging the 'Natural' preference among local consumers to increase share in personal care categories Focus markets: - GCC - Egypt - Nigeria - Bangladesh - Nepal - US

High level of localization of manufacturing and sales & marketing.

THEORATICAL BACKGROUND Meaning of Ratio Ration is simple arithmetical expression of the relationship of one number to another. According to accountants Handbook by Wixon Kell and Bedford, a ratio is an expression of the quantitative relationship between two numbers. In short it can be defined as the indicated quotient of two mathematical expressions. The ratios can be expressed in 1) Percentages 2) fraction and 3) Proportion of numbers. Ratio analysis is used to evaluate relationships among financial statement items. The ratios are used to identify trends over time for one company or to compare two or more companies at one point in time. Financial statement ratio analysis focuses on three key aspects of a business: liquidity, profitability, and solvency.

The Following four steps are involved in the ration analysis 1. Selection of relevant data from financial statements depending upon financial analysis 2. Calculation of appropriate ratios. 3. Comparison of calculated ratios of the same firm in the past or the ratios developed from the projected financial statements to the ratios of some other firms or the comparison with ratios of the industry to which firm belonged. 4. Interpretations of ratios.

INTERPRETATION OF RATIOS The Interpretation of ratios is an important factor though calculation of ratio is also important but it is only a clerical task whereas interpretation needs skill, intelligence and foresightedness. The impact of factors such as price level changes, change in accounting policies, window dressing etc. should be kept in mind when attempting to interpret the ratios. The interpretation of ratios can be made in following ways:1. Intra firm Comparison: - Here the ratios of one organization compared with the ratios of the same organization for the various years. 2. Inter Firm Comparison: - Ratios of the one organization may be compared with the ratios of the other organizations in the same industry and such comparison will be meaningful as the various organizations, in the same industry may be facing similar kinds of financial problems. 3. The ratios of an organization may be compared with some standard, which may be supposed to be thumb-rule for the evaluation of the performance. Classification of Ratios The ratios may be classified under the various ways, which may use various criterions to do the same. However for the convenience purpose, the ratios are classified under the following groups1. Liquidity Group 2. Turnover Group 3. Profitability Group 4. Solvency Group and 5. Miscellaneous Group

Liquidity Group
The ratios computed under this group indicate the short-term position of the organization and also indicate the efficiency with which the working capital is being used. Commercial banks and short-term creditors may be basically interested in the ratios falling under this group. Two most important ratios may be calculated under this group.

1) Current Ratio it is calculated as Current assets Current Liabilities

Current ratio indicates the backing available to current liabilities in the form of current assets. In other words, higher current ratio indicates that there are sufficient assets available with the organization, which can be converted in the form of cash. A current ratio of 2:1 is supposed to be standard and ideal.

2)

Liquid Ratio or Acid test Ratio it is calculated as Liquid Assets Liquid Liabilities

Here liquid assets include all assets except inventory and prepaid expenses and liquid liabilities except overdraft or cash credit or outstanding expenses. Liquid ratio indicates the backing available to liquid liabilities in the form of liquid assets. The term liquid assets indicate the assets, which can be converted in the form of cash without any reduction in the value. Almost immediately whereas the term liquid liabilities which are required to be paid almost immediately. In other words, a higher liquid ratio indicates that there are sufficient assets available with the organization, which can be converted in the form of cash almost immediately to pay off those liabilities, which are to be paid off almost immediately. As such higher the liquid ratio better will be the situation. A liquid ratio of 1:1 is supposed to be standard and ideal.

Turnover Group
Ratios computed under this group indicate the efficiency of the organization to use the various kinds of assets by converting them in the form of sales. Under this group the following classification of ratios are made.

1) Fixed assets turnover ratio :- it is calculated as Net sales Fixed Assets

A high fixed assets turnover ratio indicates the capability of the organization to achieve maximum sales with the minimum investment in fixed assets. It indicates that the fixed assets are turned over in the form of sales more number of times. 2) Current Assets turnover ratio : it is calculated as Net Sales Current Assets A high current assets turnover ratio indicates the capability of the organization to achieve maximum sales with the maximum investment in current assets. It indicates that the current assets are turned over in the form of sales more number of times. 3) Working Capital turnover Ratio : it is calculated as Net Sales Working Capital A high working capital turnover ratio indicates the capability of the organization to achieve maximum sales with the minimum investment in the working capital. It indicates that working capital is turned over in the form of sales more number of times. 4) Inventory Stock Turnover ratio : it is calculated as Cost of Goods sold Average Inventory A High Inventory turnover ratio indicates that maximum sales turnover is achieved with the minimum investment in the inventory. As such general rule, High inventory turnover ratio is desirable. 5) Debtors Turnover Ratio : it is calculated as

Net credit sales Average Accounts Receivable

This ratio indicates the efficiency of the concern to collect the amount from the debtors. Higher debtor turnover ratio is good because more higher debtor turnover ratio means, more fastly, we are collecting money.

6) Capital Turnover Ratios : it is calculated as Net Sales Capital Employed

This ratio indicates the efficiency of the organization with which the capital employed is being utilized. A high capital turnover ratio indicates the capability of the organization to achieve maximum sales with minimum amount of capital employed. As such higher the capital turnover better will be the situation.

SOLVENCY GROUP Ratios computed under this group indicate the long term financial prospectus of the company. The shareholder, Debenture holders & other lenders of long term finance/ term loan may be basically under this group. Following ratios are under this group 1) Debt- equity Ratio it is calculated as Debt Equity
Debt-equity ratio indicates the state of shareholders or owners in the organization vis--vis that of the creditors. It indicates the cushion available to the creditors on liquidation of the organization. A high debt-equity ratio may indicate that financial status of the creditors is more than that of the owners. A very high debt-equity ratio may make the proportion of investment in the organization a risky one. On the other hand a very low debt equity rate may mean that the borrowing capacity of the organization is being underutilized.

2) Proprietary Ratio - it is calculated as Shareholders Fund Total Assets This ratio indicates the extent to which the owners funds are sunk in different kinds of assets. If the owners fund exceeds fixed assets, it indicates that a part owners fund invested in the current assets

also and if owners fund are less than fixed assets it indicates that the creditors finance a part of fixed assets either by long term or short term.

3) Capital Employed Ratio :- it is calculated as Fixed Assets *100 Capital Employed This ratio indicates the extent to which the long-term funds are sunk in Fixed assets.

4) Interest Coverage Ratio : It is calculated as ,

PBIT

Interest charges This ratio indicates protection available to the lenders of long-term capital in the form of funds available to pay the interest charges i.e. profits. Normally a high ratio will desirable but too high a ratio may indicate underutilization of the borrowing capacity of the organization where as too low a ratio may indicate excessive long-term borrowings or inefficient operation.

PROFITABILITY GROUP 1) Gross Profit Ratio :It is calculated as, Gross Profit * 100 Net Sales The gross profit ratio indicates the relation between production cost and sales and efficiency with which the goods are produced or purchased. A high gross profit ratio may indicate that the organization is able to produce or purchase at a relatively lower cost. 2) Net Profit Ratio :It is calculated as, Net Profit after Taxes * 100 Net Sales The net profit ratio indicates that portion of sales available to the owners after the consideration of all types of expenses and costs either operating or non-operating or normal or abnormal. A high net profit ratio indicates higher profitability of the business.

3) Operating Ratio :It is calculated as, MFG COGS + operating expenses * 100 Net Sales This ratio indicates the percentage of net sales, which is absorbed by the operating cost. A high operating ratio indicates that only a small margin of sales is available to meet the expenses in the form of interest, dividend and operating exp. As such low operating ratio will always be desirable.

OVERALL PROFITABILITY GROUP

1) Return on Assets :It is calculated as, Net Profit * 100 Assets Return on assets measures the profitability of the investment in a firm. As such higher return on assets will always be preferred. However Return on Assets does not indicate the profitability of various sources of funds, which finance total assets. 2) Return on Capital Employed :It is calculated as, Net Profit after Taxes + Int on Long Term Loans * 100 Capital Employed Return on capital employed measure as the profitability of the capital employed in the business. A high return on capital employed indicates a better and profitable use of long term funds of owners and creditors. As such a high return on capital employed is preferred. 3) Return on Share Holders Funds :It is calculated as, Net Profit after Taxes * 100 Total Shareholders funds This ratio indicates the profitability of a firm in relation to the fund supplied by the shareholders.

MISCELLANEOUS GROUP 1) Capital Gearing Ratio :It is calculated as, Fixed income bearing securities Equity Capital A high capital gearing ratio indicates that in the capital structure, fixed income bearing securities are more in comparison to the equity capital in that case the company is said to be highly geared. On the other hand, if fixed income-bearing securities are less as compared to equity capital the company is said to be lowly geared. 2) Earning Per Share :It is calculated as, Net Profit after Tax and dividend Number of equity shares o/s It is widely used ratio to measure the profit available to the equity shareholders on a per share basis. As such increasing Earning Per Share may indicate the increasing trend of current profits per equity share. 3) Dividend Payout Ratio :It is calculated as, Dividend Per Share * 100 Earning Per Share It Measures the relationship between the earnings belonging to the equity shareholders and the amount finally paid to them by way of dividend. It indicates the policy of management to pay cash dividend.

ADVANTAGES OF RATIOS 1. Ratio simplify comprehension of financial statement. They tell the whole story as a heap of financial data is condensed in them. They indicate the changes in the financial condition of the business. 2. They act as index of the efficiency of enterprises. As such they serve as an instrument of management control. It is an instrument for diagnosis of the financial health of an enterprise. The efficiency of the various individual units similarly situated can be judge through inter-firm comparisons. 3. The ratio analysis can be if invaluable aid to management in the discharge of its basic function of forecasting, planning. Co-ordination, communication and control. A study of the trend of strategic ratio may help the management in this respect. Past ratio indicates trends in costs, sales, profits and other relevant facts. 4. The ratio analysis provides data for inter-firm comparison or intra-firm comparison. Comparison cannot be made with absolute figures. Net profit of one firm cannot be compared with the net profit of the other firm. But the percentages of net profits can be compared to evaluate the performance. Similarly performance and efficiency of different departments in the same firm can be compared with help of ratios. 5. Investment decisions can at times be based on the conditions revealed by certain ratios. 6. They make it possible to estimate the other figure when one figure is known.

LIMITATIONS OF RATIO ANALYSIS Though ratio analysis technique has got number of advantages, it attracts equal number of disadvantages too. Some of important advantages are as follows: 1) The ratio of the other organization May not be readily available. 2) Different accounting policies may be followed by the constituent organization in the industry. 3) The constituent organization in the same industry may vary from each other in term of age, location, extent of automation, quality of management and so on. 4) The technique of ratio analysis may prove to be inadequate in some situation if there is difference of opinions regarding the interpretation of certain items while computing certain ratios. 5) As the ratios are computed on the basis of financial statement, the basic limitation, which is applicable to the financial statement, is equally applicable in case of technique of ratio analysis also. Thus the ratio analysis points out the financial condition of business whether it is very strong, good, questionable or poor and enables the management to take necessary steps. Research Methodology 1) Data Collection All data was collected from the documents

RESEARCH METHODOLOGY 1) DATA COLLECTION Data was collected from the documents, which were in printed forms like annual report, pamphlets, reference books based on Financial Management and through websites.

METHODOLOGY FOR ANALYSIS The methodology opted for carrying out project was by way of collection of data from the companys annual report for the past three years i.e. from 2003-2004 to 2005-2006, for the calc ulation of ratios. The theory related to ratios was gathered from various financial management books, which served the purpose of calculation and analysis of ratios. Further based on the above statements the ratios related to liquidity, turnover, solvency, profitability and over profitability groups and miscellaneous group have been calculated and interpreted in an intra firm comparison method. Similarly the ratios have been presented in graphical format to have clear understanding of it during three financial years and changes in it.

RATIO ANALYSIS

Liquidity Group 1) Current Ratio :Formula Current Assets/ Current liabilities FY 07-08 0.91 FY 08-09 1.19 FY 09-10 0.93 FY 10-11 0.99 FY 11-12 1.15

Current Ratio
1.4 1.2 1 0.8 0.6 0.4 0.2 0 Mar '08 Mar '09 Mar '10 Mar '11 Mar '12 Current Ratio

Significance:This ratio is calculated for knowing short term solvency of the organization.This ratio indicates the solvency of the business i.e. ability to meet the liabilities ofthe business as and when they fall due. The Current Assets are the sources from which the current liabilities are to be met. Certain authorities have suggested that in order to ensure solvency of a concern current assets should be twice the current liabilities and therefore this ratio is known as 2:1 ratio . However it depends upon the nature of the
Industry. The standard current ratio applicable to the Indian industries is 1.33:1. Here the Current Ratio of Dabur Ltd. Indicates that from FY 2007-08 to FY 2009-10 has low liquidity as the ratio is near to 1 :1 but in the next two FY the assets to pay off short term liabilities as and when they fall due. The company has maintained its short term solvency status which is appreciable.

2) Acid Test Ratio:Formula Liquid Assets/ Liquid Liabilities FY 07-08 0.58 FY 08-09 0.99 FY 09-10 0.68 FY 10-11 0.78 FY 11-12 0.8

Acid Test Ratio

1.2 1 0.8 0.6 0.4 0.2 0 Mar '08 Mar '09 Mar '10 Mar '11 Mar '12 Acid Test Ratio

Significane :-

This ratio serves as a realistic guide to the short term solvency of the company. It is a measure of the extent to which liquid resources are immediately available to meet current obligation. In so far as it eliminates inventories as part of current ratio, this is a more rigorous test of liquidity than the Current Asset Ratio and when used in conjunction with it, gives a better picture of the firms ability to meet its short term debts out of its short term assets. An Acid Test Ratio of 1:1 is considered to be ideal and standard. Here the ratios of the Dabur India Ltd.through out the years considered indicates that it has less assets which can be converted in the form of cash almost immediately to pay off those liabilities which are to be paid off immediately. It must be remembered that the company is improving its Acid Test Ratio year by year which is appreciable as such higher the liquid ratio better the situation. In the last financial year the ration decline again it shows that company does not have constant ratio.
Turnover Group : 1) Fixed assets to Turnover :-

Formula FY 07-08 Net Sales/ Fixed Assets 4.67

FY 08-09 4.84

FY 09-10 4.31

FY 10-11 FY 11-12 4.39 4.38

Fixed Assets to Turnover

4.9 4.8 4.7 4.6 4.5 4.4 4.3 4.2 4.1 4 Mar '08 Mar '09 Mar '10 Mar '11 Mar '12 Fixed Assets to Turnover

Significance:This ratio measures the efficiency in the utilization of fixed assets. This ratio indicates whether the fixed assets are being fully utilized. It is an important measure of the efficient and profit earning capacity of the business. Normally standard ratio is taken as five times. The financial year 2007-08 had so good fixed asset turnover ratio. The financial year 2009-10 had a decrease in the fixed assets turnover ratio due to addition in the Fixed Assets but the sale is not increased as per the Assets. The same ratio goes up to 4.31 times in the financial year 2010-11 due to rise in sales.

2) Working Capital Turnover Ratio ;-

Formula Net Sales/ Working Capital

FY 07-08 10

FY 08-09

FY 09-10 6.0

FY 10-11 FY 11-12 6.5 6.3

Working Capital Turnover Ratio

120 100 80 60 40 20 0 -20 -40 -60 -80 Mar '08 Mar '09 Mar '10 Mar '11 Mar '12 Working Capital Turnover Ratio

Significance:This ratio signifies achievement of maximum sales with less investment in working capital. As such higher the ratio better will be the situation. The financial year 2007-08 the Working Capital Turnover Ratio goes to negative as the company is in need of working capital but company shows the increase in the working capital situation as per the years.

3 ) Inventory Turnover Ratio

Formula Net Sales/ Average Inventory

FY 07-08 FY 08-09 12.52 10.94

FY 09-10 11.31

FY 10-11 FY 11-12 8.65 7.19

Inventory Turnover Ratio

14 12 10 8 6 4 2 0 Mar '08 Mar '09 Mar '10 Mar '11 Mar '12 Inventory Turnover Ratio

Significance: It is an indication of the velocity with which merchandize moves through the business. This is a test of inventory to discover possible trouble in the form of overstocking or overvaluation. A low inventory turnover may reflect dull business, overinvestment in inventory or accumulation of absolute and unsaleable goods. A high inventory turnover indicates relatively lower amount of working capital locked in inventories. The financial year 2007-08 had excellent inventory turnover ratio locking up smaller part of funds in inventory. The company had low inventory turnover ratio for the year 2011-12 thus indicating over investment in inventory but it has moving low & high every year its shows that the fund lock in the inventory is less & company is trying to do the best in this field.

SOLVENCY GROUP 1) Debt-Equity Ratio :-

Formula Debt / Equity

FY 07-08 FY 08-09 0.03 0.19

FY 09-10 0.14

FY 10-11 FY 11-12 0.23 0.21

Debt Equity Ratio

0.25 0.2 0.15 0.1 0.05 0 Mar '08 Mar '09 Mar '10 Mar '11 Mar '12 Debt Equity Ratio

Significance: It is a measure of financial strength of a concern. Lower the ratio greater the security available to the creditors. A satisfactory current ratio and ample working capital may not always be a guarantee against insolvency if the total liabilities are inordinately large. The purpose of this ratio is to derive an idea of the amount of capital supplied be the owners and of assets cushion available to creditors on liquidation. Generally 1:2 ratio is acceptable, but the ratio of at least 1:1 is desirable as banks even do accept this. The greater the interest of the owners as compared with that of the creditors, the more satisfactory is the financial structure of the business because in such a situation the management is less handicapped by interest charges and debt repayment requirements. A company having a stable profit can afford to operate on a relatively high debt-equity ratio; whereas in the case of a company having an unstable profit, a high debt-equity ratio reflects a speculative situation. Too much reliance on external equities may indicate undercapitalization, whereas too much reliance on internal equities may lead to over-capitalization. All the financial years considered has debt-equity ratio less than 1:1, which is showing that there is no equal amount of interest of the owners as compared with that of creditors.

2) Proprietary Ratio :-

Formula Proprietor Fund/ Total Assests *100

FY 07-08 FY 08-09 46.28 47.15

FY 09-10 42.46

FY 10-11 FY 11-12 46.94 46.34

Propreitary Ratio
48.00 47.00 46.00 45.00 44.00 43.00 42.00 41.00 40.00 Mar '08 Mar '09 Mar '10 Mar '11 Mar '12 Propreit ary Ratio

Significance: This ratio is normally a test of strength of credit-worthiness of the concern. To the extent the percentage of liability increase or the percentage of capital dwindles, the credit strength of the concern deteriorates. A high proprietary ratio is however a frequently indicative of overcapitalization and an exercise investment in fixed assets. A low proprietary ratio on the other hand is a symptom of undercapitalization and an excessive use of creditors funds to finance the business. The financial year 2008-09 had good proprietary ratio as it indicates assets are financed to the extent of 47.15% by the owners funds and the balance is financed by the outsiders. The year 2009-10 had fall in proprietary ratio but in the year 2010-11 the company has improved due o rise in reserve and surplus due to appreciable profits in the last financial year.

Profitability Ratios : 1) Gross Profit Ratio :-

Formula

FY 07-08 FY 08-09 17.19

FY 09-10 18.06

FY 10-11 FY 11-12 17.91 16.56

Gross Profit / Sales *100 17.37

Gross Proft Ratio

18.5 18 17.5 17 16.5 16 15.5 Mar '08 Mar '09 Mar '10 Mar '11 Mar '12 Gross Proft Ratio

Significance: This ratio indicates the degree to which selling prices of goods per unit may decline without resulting in losses on operations for the firm.A high gross profit ratio as compared with that of the other firm in the same industry implied that the firm in question produces its products at lower cost. It is a sign of good management. A low gross profit ratio may indicate unfavorable purchasing and make-up policies, the inability of management to develop sales volume, theft, damage, bad maintenance, market reduction in selling prices not accompanied by proportionate decrease in the cost of goods etc. The company is growing till the last year as far as gross profit is concerned but in the last year i.e. FY 2011-12 the Gross Profit of Company is decline up to 16.56%. This shows that company does not have the standard Gross Profit Ration and it not able to maintain the cost ratio as per the last years.

2) Net Profit Ratio

Formula Net Profit / Sales *100

Significance: -

FY 07-08 FY 08-09 15.06 15.44

FY 09-10 15.03

FY 10-11 FY 11-12 14.27 12.17

This ratio differs from the ratio of operating profits to net sales in as much as it is calculated after adding non-operating incomes, like interest, dividends on investments etc to operating profits and deducting non-operating expenses such as loss on sale of old assets, provisions for legal damage etc. from such profits. The ratio is widely used as a measure of over-all profitability and is very useful to the proprietors. Reading along with the operating ratio it gives an idea of the efficiency as well as profitability of the business to a limited extent. The company has improved its net profits till the FY 2010-11 but from the FY 1011 the NP Ratio starts decline as the cost of the company for administration & Employee has increased.

Over Profitability Ratios 1) Return on Assets

Formula Net Profit / Assets *100

FY 07-08 FY 08-09 5.95 8.43

FY 09-10 8.6

FY 10-11 FY 11-12 5.85 7.17

Return on Assets
10 9 8 7 6 5 4 3 2 1 0 Mar '08 Mar '09 Mar '10 Mar '11 Mar '12

Return on Assets

Significance:The ratio is a measure of the return on the total resources of the business enterprise. It shows how efficiently management has used the funds provided be the creditors and the owners. It can be referred that the companys Return on assets was better in the past financial years that the current. Company is trying to increase the ration as year goes ahead its good sign for the growth of the company.

2) Return on Capital Employed

Formula Net Operating Profit after Tax / Capital Employed *100

FY 0708 67.51

FY 0809 47.98

FY 09-10 61.62

FY 10-11 FY 11-12 44.16 40.51

Return on Capital Employed

80 70 60 50 40 30 20 10 0 Mar '08 Mar '09 Mar '10 Mar '11 Mar '12 Return on Capital Employed

Significance: Return on capital employed measures the profitability of the capital employed in the business. A high business return on capital employed indicates better and profitable use of long term funds of owners and creditors. As such a high return capital employed will always be preferred. The company has rising trend of return on capital employed indicating efficient use of funds of the creditors and owners by the management which is appreciable.

3) Return on Shareholders Fund:

Formula
Net Operating Profit after Tax / Shareholders Fund*100

FY 0708 61.58

FY 0809 51.20

FY 09-10 58.04

FY 10-11 FY 11-12 46.29 37.09

Return on Shareholders Fund

70 60 50 40 30 20 10 0 Mar '08 Mar '09 Mar '10 Mar '11 Mar '12 Return on Shareholders Fund

Significance:The ratio shows how well the firm used the resources of the owner. This ratio is a measure of the profitableness of an enterprise. The realization of a satisfactory net income is the major objective is being achieved. The financial year 2007-08 had high returns on shareholders fund as compared to next financial years. However the management of the company is not able to maintain the same return in the next financial years.

NOTES FORMING PART OF THE PROJECT REPORT

1. Debtors for sale of assets has not been considered which has been duly mentioned in the schedules. 2. While considering net sales, returns from sales has been deducted from gross sales. 3. Gross profit is calculated by deducting manufacturing expenses from Net Sale. 4. All Above ratios are calculated on the basis of following financial data

Balance Sheet of Dabur India

Rs. In Cr.
Mar '12 Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets 883.23 297.9 585.33 25.12 552.72 528.57 224.17 261.2 1,013.94 603.61 30.09 1,647.64 0 695.7 592.4 1,288.10 359.54 53.83 1,576.54 766.88 269.32 497.56 11.92 519.23 460.58 202.46 26.08 689.12 461.81 166.33 1,317.26 0 539.05 535.36 1,074.41 242.85 82.95 1,354.51 687.23 236.28 450.95 23.31 348.51 298.44 130.48 48.8 477.72 348.94 115.11 941.77 0 471.73 440.1 911.83 29.94 2.74 855.45 518.77 210.45 308.32 51.71 232.05 261.72 112.36 32.16 406.24 455.65 111.53 973.42 0 381.87 315.1 696.97 276.45 8.64 877.17 467.93 189.77 278.16 16.26 270.37 201.15 100.46 67.36 368.97 206.94 0.9 576.81 0 345.16 265.41 610.57 -33.76 13.95 544.98 174.21 174.21 0 0 1,128.28 0.78 1,303.27 19.12 254.15 273.27 1,576.54 174.07 174.07 0 0 927.09 0 1,101.16 17.57 235.78 253.35 1,354.51 86.76 86.76 0.14 0 662.48 0 749.38 24.27 81.8 106.07 855.45 86.51 86.51 0 0 651.69 0 738.2 8.26 130.72 138.98 877.18 86.4 86.4 0 0 441.92 0 528.32 16.45 0.24 16.69 545.01 Mar '11 Mar '10 Mar '09 Mar '08

Profit & Loss account of Dabur India

Rs. In Cr.
Mar '12 Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 17,421.01 2.66 130 7.48 17,407.24 2.71 115 6.33 8,675.86 4.99 200 8.64 8,650.76 4.32 175 8.53 8,640.23 3.67 150 6.11 2,092.87 46.41 243.36 25.22 605.84 145.04 0 3,158.74 659.92 666.81 13.4 653.41 36.81 29.07 587.53 0 587.53 123.79 463.24 1,065.87 0 226.47 36.74 1,740.68 42.39 230.84 25.21 589.09 100.15 0 2,728.36 624.38 663.54 12.93 650.61 37.73 16.6 596.28 0.25 596.53 124.85 471.41 987.68 0 200.19 32.82 1,393.97 35.43 212.34 22.74 557.26 103.84 0 2,325.58 551.52 579.47 13.28 566.19 31.91 5.66 528.62 -0.19 528.43 93.7 433.33 931.61 0 173.6 29.5 1,271.74 36.63 167.32 17.59 425.16 84.68 0 2,003.12 444.1 473.4 14.47 458.93 27.42 3.94 427.57 -0.72 426.85 51.44 373.55 731.38 0 151.39 25.73 1,026.98 38.42 149.69 15.59 400.82 75.32 0 1,706.82 389.85 407.77 10.92 396.85 25.75 5.67 365.43 -0.86 364.57 48.4 316.77 679.85 0 129.6 22.03 3,798.05 38.72 3,759.33 6.89 59.33 3,825.55 3,305.42 30.99 3,274.43 39.16 78.31 3,391.90 2,891.00 23.58 2,867.42 27.95 9.68 2,905.05 2,435.85 27.52 2,408.33 29.3 38.89 2,476.52 2,128.02 34.39 2,093.63 17.92 3.04 2,114.59 Mar '11 Mar '10 Mar '09 Mar '08

Key Financial Ratios of Dabur India Mar '12 Investment Valuation Ratios Face Value Dividend Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital Profitability Ratios Operating Profit Margin(%) Profit Before Interest And Tax Margin(%) Gross Profit Margin(%) Cash Profit Margin(%) Adjusted Cash Margin(%) Net Profit Margin(%) Adjusted Net Profit Margin(%) Return On Capital Employed(%) Return On Net Worth(%) Adjusted Return on Net Worth(%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations Return on Long Term Funds(%) Liquidity And Solvency Ratios Current Ratio Quick Ratio Debt Equity Ratio Long Term Debt Equity Ratio Debt Coverage Ratios Interest Cover Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio 7.19 17.62 7.19 4.38 8.65 19.67 8.65 4.39 11.31 23.62 11.31 4.31 10.94 22.63 10.94 4.84 12.52 25.94 12.52 4.67 53.91 0.21 52.55 40.49 56.06 0.23 50.47 41.66 52.35 0.14 42.53 36.46 38.34 0.19 31.26 28.99 46.79 0.03 36.56 32.87 1.15 0.85 0.21 0.12 0.99 0.78 0.23 0.01 0.93 0.68 0.14 0.02 1.19 0.99 0.19 0.03 0.91 0.58 0.03 0.01 17.54 16.36 16.56 14.9 14.9 12.17 12.17 40.51 37.09 40.13 7.17 7.17 43.91 19.06 17.76 17.91 15.58 15.58 14.27 14.27 44.16 46.29 45.21 5.85 5.85 53.79 19.17 17.97 18.06 15.88 15.88 15.03 15.03 61.62 58.04 56.29 8.6 8.6 68.96 18.33 17.11 17.19 15.97 15.97 15.44 15.44 47.98 51.2 48.65 8.43 8.43 55.29 18.6 17.29 17.37 16.16 16.16 15.06 15.06 67.51 61.58 59.99 5.95 5.95 68.93 1 1.3 3.79 21.58 5.41 93.34 1 1.15 3.59 18.81 4.02 93.41 1 2 6.34 33.05 7.14 87.1 1 1.75 5.1 27.84 6.84 87.35 1 1.5 4.51 24.23 4.33 87.46 Mar '11 Mar '10 Mar '09 Mar '08

Total Assets Turnover Ratio Asset Turnover Ratio

2.43 4.38

2.46 4.39

3.44 4.31

2.81 4.84

3.98 4.67

Average Raw Material Holding Average Finished Goods Held Number of Days In Working Capital Profit & Loss Account Ratios Material Cost Composition Imported Composition of Raw Materials Consumed Selling Distribution Cost Composition Expenses as Composition of Total Sales Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit Dividend Payout Ratio Cash Profit Earning Retention Ratio Cash Earning Retention Ratio AdjustedCash Flow Times

86.17 28.16 34.43

63.26 29.32 26.7

52.96 22.08 3.76

45.18 21.28 41.32

45.68 20.13 -5.8

55.67 0.91 13.44 4.44

53.15 0.93 14.89 4.09

48.61 1.22 16.55 4.31

52.8 1.06 14.89 4.56

49.05 0.97 16.12 4.49

56.81 49.74 47.48 53.59 0.48

49.42 44.32 49.4 54.74 0.49

46.86 43.13 51.67 55.64 0.23

47.41 43.74 50.11 54.16 0.36

47.86 43.54 50.87 55.41 0.05

CONCLUSION
The company has good short term liquidity position as both the liquidity ratios are favorable and appreciable which concludes that company has got sufficient assets to pay off short term debts as and when they fall due. The company had excellent turnover of various assets in the year 2004-2005 as the sales rose by 72% indicating better assets management policy. The assets were efficiently employed to generate maximum sales. However for the year 2005-2006 the turnover ratios suffered because of fall in sales by 31.48% and also there was rise in activity as compared to past years. For inventory turnover the year 2004-2005 was crucial as it had minimum investment in different inventories avoiding thus blockage of funds. The company has strong solvency position as all the solvency ratios are favorable. Debt-equity ratio is favorable indicating equal share of owners and creditors. The working capital ratio indicates the company has funded for working capital through long term funds which represents accepted finance policy. The proprietary ratio indicates around 60% of assets are financed by owners fund which indicates reasonable creditworthiness to the company. The company has got excellent gross profit ratio and the trend is rising which is appreciable indicating efficiency in production cost. The net profit for the year 2005-2006 is excellent and it is 6.17 times past year indicating reduction in operating expenses and large proportion of net sales available to the shareholders of company. The company has excellent overall profitability ratios indicating effective use of funds provided be shareholders and creditors. According to the capital gearing ratio the company is geared by including fixed income bearing securities with an intention to increase the income of shareholders.

BIBLIOGRAPHY
Following books were referred for carrying out the project: Financial Management Financial Accounting Management Accounting PTU Book Choudhary & Chopde Ainnapure

Annual Reports from 2007-2008 to 2011-2012 of Dabur India Ltd. Following websites were referred: www.dabur.com www.moneyconrtol.com http://www.dionglobal.com/ www.google.com