SUMMER TRAINING PROJECT REPORT

ON
FINANCIAL ANALYSIS

OF

NESTLE INDIA LIMITED

Submitted for the partial fulfillment of the degree

of

MASTER

OF

BUSINESS ECONOMICS

GOSWAMI GANESH DUTTA SANATAN DHARMA COLLEGE

CHANDIGARH

SUBMITTED TO:
SUBMITTED BY:
Mrs. Sumeet Kaur
Bhawana Devi
Roll No: 5774
1

Year: 20112013

CERTIFICATE

This is to certify that Bhawana Devi, a student of Post Graduate Degree

in Master of Business Economics, Goswami Ganesh Dutta Sanatan
Dharma College Chandigarh, has worked in M/s Sood, Sood &
Associates, Chartered Accountants, as a trainee for a period of 6
weeks, i.e. from 01.06.2012 to 20.07.2012.
During the course of her training she has completed a project report
titled financial Analysis of Nestle India limited. During this period we
found her keen interest on acquiring insight into organizational system
and procedures besides being enthusiastic in applying the concepts
and theories.
We wish her all the success in her career.
For,
Sood, Sood & Associates,

Chartered Accountants
Vikas Gupta, F.C.A.
(M.No. 096996)
2

Partner

ACKNOWLEDGEMENT

A Summer Training project is a synthesis of knowledge and experience

of experts in their related fields. However, no project is possible
without the guidelines and help that is extended by the experts to the
student with the sole benevolent purpose of intellectual development..
THANK YOU!!!! These two words are very less to be measured when
it comes to extend my gratitude towards all those who have made my
internship tenure truly a learning and memorable experience. I would
like to extend my gratitude to my company guide Mr. Vikas Gupta,
without whose guidance and help this project would not have been
possible.
Also I am thankful to my faculty guide Mrs. Sumeet Kaur of my college
for her continues guidance and invaluable encouragement.
Lastly I would like to thanks all those officers in Association who have
taken out time from their busy schedule to provide with all the
information I needed.
3

(BHAWANA DEVI)

DECLARATION

I, BHAWANA DEVI hereby declare that the work which is being

presented in dissertation entitled FINANCIAL ANALYSIS OF NESTLE INDIA
LIMITED in partial fulfillment of Master of Business Economics,
submitted in Goswami Ganesh Dutta Sanatan Dharma College is an
authentic record of my work.
I have not submitted this declaration to any other university for the
award of any other degree.

Sumeet Kaur
Devi

Bhawana
4

(Faculty Guide)

PREFACE

Decision making is a fundamental part of research process. Decisions

regarding that what you want to do, how you want to do, what tools
and techniques must be used for the successful completion of the
project. In fact it is the researchers efficiency as a decision maker that
makes the project fruitful for those who concern to the area of study.
The project presents the financial analysis of the Nestle India Limited. I
am presenting this hard carved effort in black and white. If anywhere
something is found not in tandem to the theme then you are welcome
with your valuable suggestions.

My research project Financial analysis of Nestle India Limited study

conducted under the guidance of Mrs. Sumeet Kaur.
I believe that my project report will have been very helpful to the
practical knowledge in the field of financial analysis of any
organization.

Table of Contents
CHAPTER- 1................................................................................................................ 7
Company Profile...................................................................................................... 7
CHAPTER- 2.............................................................................................................. 16
Introduction of Financial Analysis..........................................................................16
CHAPTER- 3.............................................................................................................. 37
Research Methodology.......................................................................................... 37
CHAPTER 4............................................................................................................... 40
SWOT Analysis of the Company............................................................................ 40
CHAPTER-5............................................................................................................... 43
Data Analysis and Interpretation...........................................................................43
CHAPTER-6............................................................................................................... 60
Findings................................................................................................................. 60
CHAPTER-7............................................................................................................... 62
Suggestions and Recommendations......................................................................62
Conclusion................................................................................................................ 64
Bibliography............................................................................................................. 65

CHAPTER- 1
Company Profile

COMPANY PROFILE
Sood & Sood Associates is a partnership firm established in 1984 with
three partners. All the three partners are in the profession of Chartered
Accountant. The firm has conducted various types of audits for various
Public Sector Banks, Multi National Companies, Financial Institution,
Government offices and Corporate offices.
The firm specializes in conducting the below mentioned activities:

Concurrent Audits
Statutory Audits
Foreign Exchange Management Act
Internal Audits ( Ranbaxy, Nestle, Cadbury)

It also provides consultancy, financial advisory services, and Tax

advisory services to various entities including individuals, high net
worth individuals (professionals), corporate, societies and foreign
entities.
The firm represents its client with government regulatory authorities
like Reserve Bank of India, Income Tax officials, Sales and Service Tax
officials.
Nature of Job includes:
Practicing in company law matters
Direct and Indirect Tax
Foreign Exchange Management Act
In the firm, the employees directly report to the partners of the firm.
From the training perspective the objective of the firm is to provide an
insight into the working culture of financial institutions, to strengthen
their mental and logical ability of the trainee and guide them to work
in a professional environment.
The main focus of the firm is to provide quality services to its clients
and they never compromise on their professional fronts under any
circumstances.

10

CASE STUDY
FOR
NESTLE INDIA LIMITED

11

COMPANY PROFILE
Nestle India Limited (Nestle India) is a subsidiary to Nestl S.A. a global
food products company based in Switzerland. Nestle India principally is
engaged in the manufacturing, marketing, exporting and sales of food
& beverage products which include milk products, nutrition products,
beverages, chocolates and confectionery. It markets its products under
international brand names which include Nescafe, Milo, Nestea Maggi,
and Milky bar, Kit Kat, Milkmaid, Nestl Milk, Nestl Slim Milk and
Nestl Fresh.
The report provides a comprehensive insight into the company,
including business structure and operations, executive biographies and
key competitors. The hallmark of the report is the detailed financial
ratios of the company.

SCOPE
Provides key company information for business intelligence
needs.
The report contains critical company information ' business
structure and operations, major products and services
The report provides detailed financial ratios for the past five
years as well as interim ratios for the last four quarters.
Financial ratios include profitability, margins and returns, liquidity
and leverage, financial position and efficiency ratios.

INDUSTRY SNAPSHOT
India is one of the fastest growing economies in the world. While
we are moving towards a services-led economy but still agriculture
contributes 17 per cent of the total GDP and employs 60 per cent of
the population. India is one of the key food producers in the world.

12

The Indian food industry is estimated to be worth over INR 8,

80,000 crores. The industry employs 1.6 million workers directly.

COMPANY OVERVIEW
Nestle India Limited, a subsidiary of Nestle S.A. of Switzerland, was
incorporated in 1959. Nestle S.A. of Switzerland holds around 62 per
cent stake in the company. It is a leading branded processed food
companies with a large market share.
The company first unit at Moga stated in 1961 for
manufacturing milk products

Second factory at Choladi (Tamil Nadu) in 1967 to produce

beverage

Third plant at Nanjangud (Karnataka) in 1989

The Company entered the chocolate business introducing Nestle

Premium chocolate in 1990. Company's products are sold under brand
names such as Milkmaid, Everyday, Cereal, Nescafe, Maggi, clairs,
etc. It launched the world famous Kitkat chocolates in 1995.
In 2001, it launched Nestle Pure Life bottled water. To capture the
market in coastal areas, the company launched Maggi cubes in prawn
flavor to cater to consumers' tastes. In the area of chocolate and
confectionery, Nestle Munch, a crisp wafer biscuit with chocolayer, was
rolled out nationally. In the milk and cereal category, Everyday Dairy
Whitener showed satisfactory growth while Nestle Growing up Milk,
launched in 1999, was launched nationally.
The company ventured into beverage section by launching new blend
of coffee powder, vanilla and mocha. The company also made its foray
into the iced tea segment. Nestle Pure Life bottled water was launched
in early 2001.

13

Nestle Bar- One was re-launched after renovating it to make it

smoother, creamier and better meets consumer need.
Nestle India has been continuously paying dividends to its
shareholders for the last 20 years and has a marvelous track record of
average dividend payout ratio which has been over 70 per cent.

BUSINESS SEGMENTS
The company broad product portfolio includes Milk Products &
Nutrition, Beverages, Prepared Dishes & Cooking Aids and
Chocolates & Confectionary.
Milk Products & nutrition
The company milk products & nutrition portfolio encompasses a wide
range of products that includes milk, skimmed milk, value added
products like condensed milk, curd, ghee, yogurt, cheese. These
products are sold under various popular brands - Nestle Every day,
Nestle Milkmaid, Nestle Milk, Nestle Fresh n Natural, etc. The company
enjoys the leadership position in infant milk foods business under the
famous brand Cereal with a market share of more than 68 percent.
The Milk products and Nutrition division contributes more than 46 per
cent to the companys revenues.
Beverages
Under the beverages segment, the company mainly sells instant
coffee. It is the largest coffee company in India, commanding market
share of more than 11 per cent. Besides, it sells a melted chocolate
drink, Nestle Milo. The beverages division contributes around 17
percent to the company's revenues. Beverages contribute a major
portion in the total export market. The company exports instant coffee
to various countries such as Russia and Japan. Besides, it also exports
some of its other products.
Prepared Dishes & Cooking Aids
Nestle' Maggi 2 -Minute Noodles has become an almost synonymous
name for instant noodles in India. The company later extended
culinary products such as sauces, pizza sauce, healthy soups and
magic spice cubes. The company also introduced new variants of
14

noodles such as Vegetable Atta Noodles, Dal Atta Noodles and Rice
Noodles Mania under its Maggi Noodles umbrella in the last few years.
This division contributes 23 per cent to the company's revenues.
Chocolates & Confectionary
The company also has a strong presence in the chocolates &
confectionary business. With a more than 18 per cent market share,
it is the second largest confectionary company in India. The company
sells its world famous Kit Kat brand in India along with some other
brands such as Nestle Munch (wafer chocolate), Nestle Milk bar, Polo
(mint confectionary) etc. The Chocolates & Confectionary division
contributes 14 per cent to the company's revenues.
Export

The total contribution by the export stands at 13 per cent of the

company total revenue, which is mainly through export of coffee to
Russia. Nestle India Limited is one of the top players in the processed
food & beverages industry and the largest producer of instant coffee in
India. Under Chocolates & Confectionary, Kitkat and Polo is a
successful international as well as Indian brand. And under Milk
Products & nutrition, Cereal is a market leader.

15

16

ABOUT THE PRODUCTS

Nestle is acknowledged for its understanding of consumer needs. The

business of prepared dishes and cooking aids grew rapidly as it
focused on delighting the consumers and developing the products that
enhance accessibility to nutrition. The business encompasses the
MAGGI which is the pioneer of TASTE BHI HEALTH BHI concept. MAGGI
philosophy is that everyday meal should be a celebration of taste
health and happiness throughout the year.

Nestle provided inputs to the Nestle Group R&D for the development of
an innovative product MAGGI Bhuna Masala.

Company is the leader in the instant coffee with NESCAFE. Though

2009 was a
challenging year for the coffee business in India
primarily due to adverse climatic and whether conditions that were
experienced, the Coffee and Beverages business further straightened
its position as a leader in instant coffees. While NESCAFE Cappuccino
had a successful start, popularly priced products supported growth in
the south and limited edition NESCAFE SUNRISE Rich Mountain blend
received very good feedback and despite the challenging environment
NESCAFE performed satisfactorily, achieving volume and market share
growth in India.
17

During the year based on relevant consumers insights, NESTLE KITKAT

was relaunched with an improved taste delivery making it more
chocolaty and crispy. And to further improve penetration NESTLE
KITKAT was launched in a new unique single finger format at the price
point 0f RS.5/-.
Further innovation in NESTLE MUNCH saw the launch of the GURU pack
at the
higher price point of Rs 10/-and this coupled with the
reintroduction of NESTLE CHOTU MUNCH at the price point of Rs2/contributed to the brand performance.

In recent years NESTLE MILKYBAR with its strong communication

supported with successful innovations has continued to lead the
growth in white confectionary segment.

During the year, your company also became the leader in the clairs
category with NESTLE ECLAIRS,

18

In the mint segment NESTLE POLO continued to grow market share.

In 2009 the company continued efforts to increase the availability and
visibility of the range of the confectionary products.

The other products that the portfolio contains include NESTLE

EVERYDAY Dairy Whitener, NESTLE MILKMAID Sweetened Condensed
Milk, NESTLE SLIM Milk, NESTLE NESVITA Dahi and NESVITA yogurts
which continued to do well during the year. In a very competitive
market, the EVERYDAY brand has led volume growth in the dairy
whitener category resulting in a further increase in the overall market
share and consolidating the companys position as market leader.

19

CHAPTER- 2

Introduction of Financial Analysis

20

MEANING OF FINANCIAL ANALYSIS

Financial statement refers to such statement which contains financial
information about an enterprise. Their report profitability and the
financial position of the business at the end of the Accounting period.
The term financial statement includes at least two statements which
the accountant prepares at the end of accounting period. The two
statements are:
The Balance Sheet
Profit And Loss Account

They provide some extremely useful information to the extent that

balance Sheet mirrors the financial position on a particular date in
terms structure of assets, liabilities and owner equity, and so on and
the Profit and Loss account shows the result of operations during a
certain period of time in terms of revenues obtained and the cost
incurred during the year. Thus the financial statement provides a
summarized view of financial position and operations of a firm.
The first task of financial analysis is to select the information relevant
to the decision under consideration to total information contained in
the financial statement. The second step is to arrange the information
in a way to highlight significant relationship. The final step is
interpretation and drawing of the interface and conclusions. Financial
Statement is the process of selection, relation and evaluation.

FEATURES

OF

FINANCIAL ANALYSIS

To present a complex data contained in the financial statement

in simple and understandable form.
To classify the items contained in the financial statement
inconvenient and rational groups.
To make comparison between various groups to draw various
conclusions.

21

PURPOSE

To
To
To
To
To
To
To
To

OF

ANALYSIS

OF FINANCIAL STATEMENTS

know the earning capacity or profitability.

know the solvency.
know the financial strengths.
know the capability of payment of interest and dividends.
make comparative study with other firm.
know the trend of the business.
know the efficiency of the management.
provide useful information to the management.

PROCEDURE

OF FINANCIAL

STATEMENT ANALYSIS

The following procedure is adopted for the analysis and interpretation

of financial Statements: The analyst should know the plans and policies of the
managements that he may be able to find out whether these
plans are properly executed or not.
The extent of analysis should determine so that the sphere of
work may be decided. If the aim is find out, Earning capacity of
the enterprise then analysis of income statement will be
undertaken. On the other hand, if financial position is to be
studied then balance sheet analysis will be necessary.
The financial data be given in statement should be recognized
and rearranged. It will involve grouping the similar data under
some heads. Breaking down of individual components of the
statement according to nature. A relationship is established
among financial statements with the help of tools and techniques
of analysis such as ratios, trends, common size, and fund flow,
etc.
The information is interpreted in a simple and understandable
way. The significance and utility of financial data is explained
which help in decision making.
The conclusion drawn from the interpretation is presented to the
management in the form of the report.
22

Analyzing financial statement involves evaluating three characteristics

of the company:
Its liquidity
Its profitability
Its insolvency.
A short-term creditor, such as a bank, is primarily interested in the
liquidity. A long-term creditor, such as a bondholder, however, looks to
profitability and solvency measures that indicate the companys ability
to survive over a long period of time

TOOLS

OF

FINANCIAL ANALYSIS

Various tools are used to evaluate the significance of financial

statement data. Three commonly used tools are these
Ratio Analysis
Fund Flow Analysis
Cash Flow Analysis

RATIO ANALYSIS
Ratio analysis isnt just comparing different numbers from the balance
sheet, income statement, and cash flow statement. It means
comparing the number against previous year of other companies, the
industry, or even the economy in general. Ratios look at the
relationship between individual values and relate them to how a
company has performed in the past, and its performance in the future .
23

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. In simple language ratio is one number
expressed in terms of another and can be worked out by dividing one
number into another.

For example, Current assets of the firm are 5, 00,000 and Current
liabilities are 2, 50,000 then the ratio of current assets to current
liabilities will work out to be 2 such type of ratio are called simple or
pure ratios.

OBJECTIVE

OF

RATIOS

Ratios are worked out to analyze the following aspects of business

organization
A) Solvency
Long term
Short term
Immediate
B) Stability
C) Profitability
D) Operational efficiency
E) Structural Analysis
F) Effective utilization of resources
G) Leverage or external financing

FORM

OF

RATIO

Since a ratio is a mathematical relationship between two or more

variables, accounting figures, such relationship can be expressed in
different ways as follows:A) As a pure ratio
24

For example the equity share capital of a company is Rs. 20, 00,000 & the preference
share capital is Rs. 5,00,000 the ratio of equity share capital to preference share capital
20,00,000:5,00,000=4:1

Sales

EQUITY SHARE CAPITAL

PREFERENCE SHARE
CAPITAL

B) As a rate of times
In the above case the equity share capital may also be described
as 4 times that of preference share capital. Similarly, the cash
sales of a firm are Rs. 12, 00,000 & credit sales are Rs. 30,
00,000. So the ratio of credit sales to cash sales can be described
as
2.5[30, 00,000/12, 00,000] = 2.5 times are the credit
sales.

25

Sales

CASH SALES
CREDIT SALES

C) As a percentage
In such case, one item may be expressed as a percentage of some other items. For
example, net sale of the firm are Rs.50, 00,000 & the amount of the gross profit is Rs.
10,00,000 then the gross profit may be described as 20% of sales [10, 00,000/50,
00,000]

STEPS

IN

RATIO

ANALYSIS

The ratio analysis requires following steps

Calculation of ratios
Comparing the ratio with some predetermined standards.
The standard ratio may be the past ratio of the same firms
industrys average ratio or projected ratio or the ratio of the most
successful firm in the industry. In interpreting the ratio of the
particular firm the analyst cannot reach any fruitful conclusion
unless the calculated ratio is compared with the predetermined
standard.

TYPES

OF COMPARISONS

The ratio can be compared in three different ways

26

a) Cross section analysis

One of the ways of comparing the ratios of the firm is to compare
them with the ratio or ratios of some other selected firm in the
same industry at the same point of time. The cross section
analysis helps the analyst to find out as to how a particular firm
has performed in relation to its competitors. The cross section
analysis is easy to be undertaken as most of the data required for
this may be available in financial statement of the firm.
b) Time series analysis
By comparing the present performance of the firm with the
performance of the same firm over the last few years, an
assessment can be made about the progress of the firm. Time
series analysis helps the firm to assess whether the firm is
approaching the long-term goals or not. The time series analysis
looks for
Important trends in financial performance
Shift in trend over the years
Significant deviation if any from the other set of data.
c) Combined analysis
If the cross section & time analysis, both are combined together
to study the behavior & pattern of ratio, then meaningful &
comprehensive evaluation of the performance of firm can
definitely be made. A trend of ratio of a firm compared with the
trend of ratio of the standard firm can give good results, for
example, the ratio of operating expenses to net sales for firm
may be higher than the industry however, over the years it has
been declining for the firm, whereas the industry average has not
shown any significant changes.
The combined analysis shows that the ratio of the firm is above
the industry average, but it is decreasing over the years &
approaching the industry average.

NATURE

OF

RATIO ANALYSIS

27

Ratio analysis is a technique of analysis and interpretation of financial

statements. It is a process of establishing and interpreting various
ratios for helping in making certain decisions. It is only a means of
better understanding of financial strengths and weaknesses of a firm.
There are number of ratios which can be calculated from the
information given in the financial statements, but the analyst has to
select the appropriate data and calculate only few appropriate ratios
from the same keeping in mind the objective of analysis.
The following are the fore step involved in the ratio analysis

Selection of the relevant data depending upon

the objectives of the analysis

Calculation of the ratio from the above data

comparison of the ratio with the past ratio

Interpretation of the ratio

INTERPRETATION

OF

THE RATIO

The interpretation of the ratios is an important factor. The limitations

of ratio analysis should also be kept in mind while implementing them.
The impact of factors such as price level changes, change in
accounting policies, etc. should also be kept in mind when attempting
to interpret ratios.
The interpretation of the ratio can be made in the following ways:
Single Absolute Ratio: Generally speaking one cannot draw
any meaningful conclusion when a single ratio is considered in
28

isolation. But single ratios may be studied in relation to certain

rules of thumb which are based upon well proven convention as
for example 2:1 is considered to be a good ratio for current
assets to current liabilities.
Group of Ratios: Ratios may be interpreted by calculating a
group of related ratios. A single ratios supported by another
related additional ratios become more understandable and
meaningful. For example, the ratio is current assets to current
liabilities to draw more dependable conclusion.
Historical Comparison: One of the easiest and most popular
ways of evaluating the performance of the firm is to compare its
present ratios with the past ratios called comparison overtime.
When financial ratios are compared over a period of time, it gives
an indication of the directions of the change and reflects whether
the firms performance and financial position has improved,
deteriorated or remained constant over a period of time.
Projected ratio: Ratios can also be calculated for further
standard based upon the projected or Performa financial
statements. These future ratios may be taken as standard for
comparison and the ratios calculated on actual financial
statements can be compared with the standard ratios to find out
variances, if any. Such variances help in interpreting and taking
corrective action for improvement in future.
Inter-firm comparison: Ratios of one firm can also be
compared with the ratios of some other selected firms in the
same industry at the same point of time. This kind of comparison
helps in evaluating relative financial position and performance of
the firm.

USE AND SIGNIFICANCE

OF

RATIO ANALYSIS

29

The ratio analysis is one of the most important tools of financial

analysis. It is used as a device to analyse and interpret the financial
health of the enterprise.
A. Managerial use of Ratio Analysis
1. Helps in decision making: Financial statements are
prepared primarily for decision making. But the information
provided in the financial statement is not an end in itself and
no meaningful conclusion can be drawn from these statements
alone. Ratio Analysis helps in making decision from the
information provided in these financial statements.
2. Helps in financial forecasting and planning: Ratio
analysis is of much help in the financial forecasting and
planning. Planning is looking ahead and the ratios calculated
for a number of years work as a guide for the future.
Meaningful conclusions can be drawn for future from these
ratios. Thus, ratio analysis helps in forecasting and planning.
3. Helps in communicating: The financial strength and
weakness of the firm are communicated in the more easy and
understandable manner by the use of ratios.
4. Helps in co-ordination: Ratios even help in co-ordination
which is of utmost importance in effective business
management.
5. Helps in control: Ratios analysis even helps in making
effective control of the business.
B. Utility to share holders/ investors
An investor in the company will help to assess the financial
position of the concern where he is going to invest. His first
interest will be the security of his investment and then a return in
the form of dividend or interest. For the first purpose he will try to
assess the value of fixed assets and loan raised against them.
The investors feel sufficient if the investors have sufficient
amount of assets.

30

C. Utility to creditors
The creditors or the suppliers extend short term credit to the
concern. They are interested to know whether financial position
of the concern warrants their payments at the specified time or
not. The concern pays short term creditors out of its current
assets. If current assets are quite sufficient to meet current
liabilities then the creditors will not hesitate in extending credit
facility.
D. Utility to employees
The employees are also interested in the financial position of the
firm especially profitability. Their wage increases and the amount
of fringe benefits are related to the volume of profits earned by
the concern. The employees make use of information available in
financial statement.
E. Utility to governmentGovernment is interested to know the overall strength of the
industry. Various financial statements published by industrial
units are used to calculate ratios for determining short term, long
term and overall financial position of the concerns. Profitability
index can also be prepared with the help of ratios.

LIMITATION

OF

THE RATIO ANALYSIS

The ratio analysis is one of the most powerful tools of financial

management. Though ratios are simple to calculate and easy to
understand, but there are number of limitations:
Limited use of a Single ratio: A single ratio, usually, does not
convey much of a sense. To make a better interpretation a
number of ratios have to be calculated which is likely to confuse
the analyst then help him in making any meaningful conclusion.
Lack of Adequate Standards: There are no well adopted
standards for all ratios which can be accepted as norms. It
renders interpretation of ratios is difficult.
31

 Limitation of Accounting: Like financial statements, ratios also

suffer from the inherent weakness of accounting records such as
their historical nature. Ratios of the past are not necessarily true
indicator of the future.
Change of Accounting Procedures: Change in the Accounting
Procedures by a firm often makes ratio analysis misleading.
Personal Bias: Ratios are only means of financial analysis and
not an end in itself. Ratios have to be interpreted and different
people interpret the same ratio in different ways.
Incomparable: Not only industries differ in their nature but also
the firms of a similar business widely differ in their size and
accounting procedures, etc. it makes comparison of ratios
difficult and misleading.
Price Level Change: While making ratio analysis, no
consideration is made to the change in price levels and this
makes the interpretation of ratios invalid.
Ratios no substitute:
Ratio analysis is merely a tool of
financial statement. Hence, ratios become useless if separated
from the statements from which they are compounded.

FORM

OF

BALANCE SHEET

Section 210 0f the companies act requires preparation of balance

sheet at the end of each trading period.

SECEDULE VI PART I
FORM OF BALLACE SHEET
Figure
s for
the

Balance sheet of.as on ..

Figur Figure
es for s for
LIAILITIES
the
the
ASSETS

Figures
for the
current
32

previo
us
year
Rs.

curre
nt
year
Rs.

previo
us
year
Rs.

year
Rs.

SHARE CAPITAL

FIXED ASSETS :

Authorizedshares
of Rs. Each

Distinguishing as far as
possible Between
expenditure upon.

Issued:
(Distinguishing
between the various
classes of capital
and
stating particulars
satisfied below,
in respect of each
class)
.shares of Rs
each.
Subscribed :
(distinguishing
between the various
classes of capital
and stating the
particulars
specified below, in
respect of each
Class)..shares of
Rs..each.. Rs.
Called up.
( of the above
shares.. shares
are allotted as fully
paid up pursuant to
a contract without
payments being
received in cash)

a. Goodwill

b. Land

c. Buildings

d. leaseholds

e. railway sidings

f. plant and
machinery

g. Furniture and
fittings.

h. Development of
property

33

(Of the above

shares..shares are
allotted as fully paid
up by the way of
bonus shares)

i. Patents, trademarks
and

designs
Specify the source
from which bonus
shares are issued
e.g. ,
Capitalization of
profits and reserves
or from share
premium Account.
Less : Calls unpaid
:
(1.)
By
Directors
(2.)

By others

Add : Forfeited
shares :
(Amount originally
paid up any capital
profit or reissue of
forfeited shares
should be
Transferred to
capital reserves.)
Notes :
1. Terms
of
redemption
and conversion

j. Livestock, and

k. Vehicles, etc
(Under each head the
original cost and the
additions thereto and
deductions therefore
during the year, and the
total depreciation
written off or provided
Up to the End of the
year is to be stated.
Depreciation written off
or
Provided shall be
allotted under the
different asset heads
and deducted in arriving
at the value Of the fixed
assets.)
In every case where the
original cost cannot be
ascertained, without
unreasonable expenses
or delay, the valuation
Shown by the books is
34

(if any) of any

redeemable
preference
capital are to
be
stated
together with
the
earliest
date
of
redemption or
Conversion.
2. Particulars
of
any option on
unissued Share
Capital are to
be specified.
3. Particulars
of
different
classes
of
preference
share are to be
given.
These particulars
are to be given
Along with share
capital.
In
the
case
of
subsidiary
companies,
the
number of shares
held
by
holding
company as well as
by
the
ultimate
holding
company
and its subsidiaries
shall be separately
stated in respect of
Subscribed
share
capital.
The auditor is not

to be given.
For the purpose of
paragraph,
such valuation will be
the net
amount at which an
asset stood in the
companys books at the
commencement of this
Act after deduction of
the amount previously
provided or written off
for depreciation or
diminution in value, and
where any such asset is
sold, the amount of sale
proceeds
Shall be shown as
deduction.
Where the sum have
been written off on a
reduction of capital or a
revaluation of assets,
every balance sheet,
subsequent to the
reduction or revaluation
shall show a reduced
figures with the date of
reduction in place of the
Original cost.
Each balance sheet for
the first five years
subsequent to the date
of reduction shall show
also the Amount of the
reduction made.
Similarly, where sums
have been added by
writing up the assets,
35

required to certify
the correctness of
such share- holdings
as certified by the
Management.
RESERVES
SURPLUS :
(1.) Capital
Reserves

AND

(2.) Capital
Redemption
Reserves.
(3.) Share
premium
Account
(Showing details
of its utilization
in the manner
provided
in
Section 78 in
the
Year
of
utilization).
(4.) Other reserves
specifying
the
nature of each
reserves and the
amount
in
respect Thereof.
Less : Debit balance
in profit and loss
account (if any)
(the debit balance in
profit
and
loss
account shall be

every balance sheet

subsequent to such
writing up shall show
the increased figure with
the date of increase in
place of the original
Cost. Each balance
sheet for the first five
years subsequent to the
date of the writing up
shall also show the
amount of increase
Made.
INVESTMENTS :
Showing nature of
investment s and mode
of valuation, for
example, cost or market
value, and
distinguishing between(1.)
Investment in
government or
trust securities.

(2.)
Investment in shares,
Debentures or
bonds.
(showing separately
shares
fully paid up and partly
paid up and also
distinguishing the
different classes of
shares and
36

shown
as
a
deduction from the
uncommitted
reserves, if any)
(5.) Surplus,
i.e.,
balance in profit
and loss account
after providing
for
propose
allocations,
namely:
Dividend, Bonus and
Reserves
(6.) Proposed
addition
reserves

to

(7.) Sinking funds

(Additions
and
deductions
since
last balance sheet
to be shown, under
each
of
the
specified
Heads.
The word fund in
relation
to
any
reserve
should
be used only where
such reserves are
specifically
represented
by
earmarked
Investments.)

showing also in similar

details investments in
shares, debentures or
bonds of subsidiary
companies)
(3.)
Immovable
properties.

(4.)
Investment in capital
of Partnership
firms.
(Aggregate amount of
companys quoted
investments and also
the market value thereof
shall be shown)
(Aggregate amount of
companys unquoted
investments shall also
be shown)
CURRENT ASSETS,
LOANS
AND ADVANCES:
CURRENT ASSETS :
(1)
Interest accrued on

SECURED LOANS :
Investments.
37

(1)

Debentures.

(2) Loans
advances
Banks.

and
from

(3) Loans
and
advances
from
Subsidiaries.
(4) Other
loans
and advances
(loans
from
directors
and/or
managers should be
shown separately)

Interest accrued and

due
on
Secured
Loans should be
included under the
appropriate
subheads
Under
the
head
Secured Loans.
The
nature
of
security
to
be
Specified in each
case. Where loans
have
been
guaranteed
by
managers
and/or
directors, a mention
thereof shall also be
made and also the
aggregate amount
of such loans under
each head.

(2)
Stores and spare
parts.

(3)
Loose tools

(4)
Stock in trade

(5)
Work-in-progress

[in respect of (2)

and (4), mode of
valuation of stock
shall be stated and
the amount in
respect of raw
materials shall
also be stated
separately where
Practicable. Mode
of valuation of
work-in-progress
shall be stated]

(6)
Sundry Debtors.

a. Debts
outstanding for
38

In
case
of
debentures,
terms
of redemption or
conversion (if any)
are to be stated
together
with
earliest
date
of
redemption
or
conversion.
UNSECURED LOANS
:
(1)

Fixed deposits.

(2) Loans
and
advances
from
subsidiaries
(3) Short
term
loans
and
advances :
(a)
From
bank.
(b)
From
others.
(Short term loans
include those which
are
due
for
repayment not later
than one year as at
the date Of the
balance sheet.
(4) Other
loans
and advances :
(a)

From

b. a period
exceeding six
Months.

c. Other debts.

Less Provision.

( The amounts to be
shown under sundry
debtors shall include the
amounts due in respect
of the goods sold or
services rendered or in
respect of other
contractual
obligations but shall not
include the amount
which are in the nature
of loans or advances)

In regard to sundry
debtors
particulars to be given
separately of-

(a)
Debts considered
good and in
respect of which
the Company is
fully secured.
39

banks.
(b)
From
Others.
(Loans
from
directors
and/or
managers should be
shown separately
Interest accrued and
due on unsecured
loans
should
be
included under an
appropriate
subheads under the
head
Unsecured Loans
Where loans have
been guaranteed by
manager,
and/or
directors, a mention
thereof shall also be
made together with
the
aggregate
amount
of
such
loans under each
head. This does not
apply
to
fixed
deposits.)
CURRENT
LIABILITIES
PROVISIONS:

AND

A. CURRENT
LIABILITIES:
1. Acceptance
2. Sundry
Creditors

(b)
Debts considered
good for which the
company holds no
security other than
the Debtors
personal security.

(c)Debts considered
doubtful or bad.
Debts due by directors
or other officers of the
company or nay of them
either severally or jointly
with Other person or
debts due by firms or
private companies
respectively in which
any director is a partner
or a director or a
Member to be
separately stated.
Debts due from other
companies under the
same management
within the meaning of
subsections
of Section 370 to be
disclosed
With the names of the
companies.
The maximum amount
due by directors or other
officers of the company
at any time during the
40

year to be shown by the

way of note.

3. Subsidiary
Companies
4. Advance
Payments and
unexpired
discounts for
the portion for
which
value
has still to be
given, e.g., in
the case of the
following
companies :Newspapers, fire
insurance,
theatres,
clubs,
banking,
Steamship
companies, etc.

The provision to be
shown
under this head should
not exceed the amount
of debts stated to be
considered doubtful or
bad and any surplus of
such provision, if
already created, should
be shown at every
closing under Reserves
and Surplus under a
separate sub-head
Reserve for Doubtful or
Bad Debts.
(7)
(7A) Cash balance on
hand.
(7B) Bank balance-

5. Unclaimed
dividends.
6. Other liabilities
(if any)
7. Interest
accrued
not due
loans

but
on

B. PROVISIONS
8. Provision
taxation
9. Proposed

for

(a)
With scheduled banks.

(b)
With others
( in regard to bank
balances
particulars to be given
separately of(a)
The balance lying with
41

dividends.
10.
For
contingencies.
11.
For
provident fund
Scheme.
12.
For
insurance.
13.
Other
provisions.
A foot-note to the
balance sheet
may be added to
show separately
:(1)
Claims
against the
(2)
not

company

Acknowledged
as debts.
(3)
Uncalled
liabilities
on
Shares partly
paid.
(4)
Arrears
of fixed
(5)
Cumulati
ve dividends.
(The
period
for
which the dividend
is in arrear or if

scheduled banks on
current accounts,
call accounts and
Deposit accounts.

(b)
The names of the
bankers other than
the Scheduled
banks and the
balances lying with
each such banker on
current account, call
account and deposit
account and the
maximum amount
outstanding at any
time during the year
with each such
banker.

(c)The nature of the

interest, if any, of
any director or his
relative in each of
the Bankers.
LOANS AND
ADVANCES :
8
(a.)
Advances and loans
to subsidiaries
b) Advances and
loans to
42

there is more than

one class of shares,
the
dividend
on
each such class that
is in arrear, shall be
stated. The amount
should be stated
before deduction of
income tax, except
that in case of taxfree dividends the
amount shall be
shown
free
of
income tax and the
fact that it is So
shown
shall
be
stated.)
(6)
Estimate
d amount of
Contracts
remaining to
be executed
on capital
account and
not provided
for.
(7)
Other
company
for
which
the
company
is
contingently
liable.

partnership firms
in which the
company and any
of its Subsidiaries
are a partner.
(9) Bills of exchange
(10) Advances
recoverable in cash
or in kind or for value
to be received, e.g.,
Rates, taxes,
Insurance, etc
(11) Balances with
customs, port
trust, etc. (where
payable on
demand)
[The instructions
regarding sundry
debtors apply to Loans
and Advances also. The
amounts due from other
companies under the
same management
within the meaning of
sub-section (1B) of
section 370 should also
be given with the names
of the companies;
the maximum amount
due from every one of
these at any time during
the year must be
shown]

43

MISCELLANEOUS
EXPENDITURE
(to the extent not
written off or adjusted)
(1)
Preliminary expenses.

(2)
Expenses including

commission or
brokerage
or underwritten or
Subscription of shares or
Debentures.
(3)
Discount allowed on
the Issue of shares
or debentures.

(4)
Interest paid out of
capital during
construction( also
stating the rate of
interest)

(5)
Development
expenditure not
44

adjusted.

(6)
Other sums
(specifying
natured)
PROFIT AND LOSS
ACCOUNT
(show here the debit
balance of profit and
loss account carried
forward after deduction
of the
uncommitted reserves,
if any)

45

CHAPTER- 3
Research Methodology

46

Research is defined as a systematic, gathering recording and analysis

of data about problem relating to any particular field.
The following sections determine the strength, reliability and accuracy
of project:
Research Design
Research Design pertains to the great research approach or strategy
adopted for particular project. A research project has to be conducted
significantly making sure that the data is collector accurately and
economically. The study used a descriptive research design for the
purpose of getting insight over the issue. It is to provide an accurate
picture of some aspects of market environment.

Collection of data

Oraganisation of data

Presentation of data

Analysis of data

Interpretation of data

47

Method of Data Collection

Secondary Data has been gathered through the internet and published
data.
Internal audit report of the company
Annual report of the company
Journals and magazines
OBJECTIVE OF THE STUDY
To understand the strong hold of nestle India.
To find out the competitive advantages of Nestle India
To know the earning capacity or profitability.
TOOLS USED FOR ANALYSIS
In this present study ratio analysis is used as a tool for doing financial
analysis of Nestle India limited. Bar graph, charts are used to depict
the financial information.

Limitations of the study

The time period provide for the project was not sufficient enough
to gather data for a big organization.
Complexity to gaining information.
Non-availability of the most recent statistical data.
Because of the limitation of information, some assumptions were
made. So there may be some personal mistake in the report.
Besides this, it was very difficult to carry out the whole analysis
on the basis of limited scope of study.

48

CHAPTER 4
SWOT Analysis of the Company

49

Strengths:
High quality and safe food products at affordable prices,
endorsed by the NESTLE Seal of Guarantee.
Recognized Nutrition, health and Wellness Company.
Strong

and

well

differentiated

brands

with

market

share

leadership.
Product innovation and renovation based on consumers insights.
Well diversified product portfolio across categories and income
strata.
Efficient supply chain.
Responsive organizations structure and strong management
team.
Distribution structure that allows wide reach and coverage in the
target markets.
Capable and committed human resources.
Participation in Global Business Excellence (GLOBE).
Strong financial position.

Weakness:
Complex supply chain configuration.
Cascading indirect taxes.
Price point portfolio.
There is not much margins for retailers to prefer its sales.

50

 The distribution cost is high as compared to the competition in

the local market.

Threat:
Price of raw material and fuels.
Availability of agro based commodities.
Food inflation.
White collar talent.

Opportunities:
Potential for expansion in smaller towns and other geographies.
Recovery of out of home segment.
Leverage Nestle Technology to develop more products that
provide Nutrition, health and wellness at affordable price.
Company can open separate stores to eliminate retailers.
They have an opportunity to expand or capture the market by
adding its product line.

51

CHAPTER-5
Data Analysis and Interpretation

52

FINANCIAL RESULTS
Millions)

AND

OPERATIONS

(Rs in
2011

2010

Gross Revenue
Profit Before interest and taxation
Interest
Impairment loss and fixed
assets(Net)
Provision for contingences(Net)
Provision For tax

51,672
9,610

43,581
8,052

14
103

16
3

323
2620

305
2387

Net Profit
Profit Brought Forward
Amount Transferred from share
Premium account
Amount Transferred from general
Reserves
Balance available for appropriation
Interim Dividends
Special dividend
Final Dividend Proposed
Corporate Dividend Tax
Transfer to general reserves

6550
1001
-

5341
125
432

431

7551
3471
1205
795
655

6329
2281
732
1157
696
534

Surplus carried in profit and loss

account

1425

1001

Key Ratio
Earnings per Share (Rs.)
55.39
Dividend per Share (Rs.)
42.50

67.94
48.50

Pursuant to scheme arrangement

Include special dividend of Rs. 7.50 per share, paid under the
Scheme of arrangement.

53

TOTAL INCOME

EBIT %
19
18.5
18
EBIT %
17.5
17
16.5
16
2007

2008

2009

2010

2011

Net Income
60000
50000
40000

Net Income

30000
20000
10000
0
2007

2008

2009

2010

2011

54

55

Dividends
Final dividend of Rs 12.50 per equity share of the face value of
Rs.10/- year 2011, amounting to Rs. 1,205 Million.
This is in addition to the two Interim Dividends for 2011, aggregating
to Rs. 36.00 per equity share, paid in May 2011 and 2011
(amounting to Rs. 3,471 Million).
The total payout for 2011 would be Rs. 5,470 Million (including the
corporate dividend tax). Further dividends will continue to be based
on the need of the company to deploy internal accruals for business
expansion and an appropriate debt equity ratio.

Earning per share

80
70
60
50

Earning per share

40
30
20
10
0
2008

2009

2010

2011

56

CURRENT RATIO
Current ratio may be defined as the relationship between current
assets and current liabilities. This ratio also known as working capital
ratio is a measure of general liquidity and is most widely used to make
the analysis of a short-term financial position or liquidity of a firm. It is
calculated by dividing the total of current assets by total of the current
liabilities.

Current Ratio =

Current Assets
Current liabilities

CURRENT ASSETS

CURRENT LIABILITIES

1 Cash in hand

1 Outstanding Expenses/Accrued expenses

2 Cash at bank

2 Bills Payable

3 Marketable securities

3 Sundry Creditors

4 Short-term investments

4 Short-term advances

5 Bills Receivables

5 Income-tax payable

6 Sundry Debtors

6 Dividends Payable

7 Inventories (stock)

7 Bank Overdraft

8 Work- in-progress
9 Prepaid Expenses

INTERPRETATION

OF

CURRENT

RATIO

57

A relatively high current ratio is an indication that the firm is liquid and
has the ability to pay its current obligations in time as and when they
become due. On the other hand, a relatively low current ratio
represents that the liquidity position of the firm is not good and the
firm shall not be able to pay its current liabilities in time without facing
difficulties. An increase in the current ratio represents the
improvement in the liquidity position of a firm while a decrease in the
current ratio indicates that there has been deterioration in the liquidity
position of the firm.

CURRENT RATIO FOR NESTLE INDIA LIMITED FOR

LAST

TWO YEARS

Year

2011

2010

Current Assets

8,565,592

7,979,532

Current Liabilities

14,223,846

11,847,828

Current Ratio

0.60

0.67

The current ratio for the company in the year 2010 was 0.67 and for
the year 2011 was 0.60. So the current ratio for the firm has decreased
by 0.07 which indicates that the companys liquidity position is
decreasing. The main reason for this is the rise in the current liabilities
of the company from 11,847,828 in 2010 to 14,223,846 in 2011.There
may not be sufficient funds to pay liabilities.

QUICK RATIO
Quick Ratio, also known as Acid Test or liquidity ratio, is the most
precise test of liquidity than the current ratio. The term liquidity refers
to the ability of the firm to pay its short term obligations as and when
they become due. The two determinant of current ratio, as a measure
of liquidity, are current assets and current liabilities.

Quick ratio =

Quick assets
58

Current liabilities
Quick/ liquid Assets

Current liabilities

Cash in hand
or Accrued expenses

Outstanding

Cash at Bank

Bills

Payable
Bills Receivable
Creditors

Sundry

Sundry Debtors
advances

Short term

Marketable Securities

Income tax

payable
Temporary investment

Dividends

Payable

INTERPRETATION

OF

QUICK

RATIO

Usually, a high acid test ratio is an indication that a company is liquid

and has the ability to meet its current or liquid liabilities in time and on
the other hand a low quick ratio represents that the companys
liquidity position is not good.

QUICK RATIO OF NESTLE INDIA LIMITED FOR

LAST

TWO YEARS

YEAR

2011

2010

QUICK ASSETS

3,578,213

3,630,415

CURRENT
LIABILITIES

14,223,846

11,847,828

59

QUICK RATIO

.251

.306

Hence the quick ratio of the company in 2011 was .251 and 2010 was .
306 shows that the quick ratio of the company has decreased by .55
because the company has purchased assets by the bank balance as
the company has not taken any loan during the year so the quick ratio
of the company decreased.
Manufacturing And Other Expenses
2011(rs in
2010(rs is
thousands)
thousands)
Employee cost
Salaries, wages,
3,982,657
2,853,949
bonus, pension,
gratuity etc.
Contribution to
126,811
102,088
provident and other
fund
Staff welfare
214,360
189,771
expenses
4,323,828
3,145,808
Advertising and sales
promotion
Freight, transport,
and distribution
General license
fees(net of taxes)
Power and fuel
Contract
manufacturing
charges
Travelling
I.T and management
information system

2,675,119

1,943,555

2,403,721

2,035,530

1,759,874

1,459,570

1,588,703
461,752

1,597,565
456,500

460,582
436,538

418,069
400,391

60

Maintenance and
repairs
Plant and machinery
Buildings
Others
Taxes and general
license fees
Consumption of
stores and spare
parts
Rent
Rates and Taxes
Training Expenses
Laboratory(quality
testing )

INCREASE/ DECREASES

327,536
36,333
71,109
434,978
272,998

278,069
33,716
59,948
371,733
226,233

219,104

151,846

209,875
205,946
165,154
151,169

176,972
201,483
175,239
137,557

IN

STOCK OF FINISHED GOODS

- PROGRESS

AND WORK

IN

61

2011 (Rs in
thousands)

2010 (Rs in
thousands)

385,378
2,327,186
2,712,564

424,279
1,977,141
2,401,420

Less: Excise Duty

94,996

129,300

Net Opening
stock(A)

2,617,568

2,272,120

462,666
2,312,885
2,775,551
71,438

385,378
2,327,186
2,712,564
94,996

2,704,113

2,617,568

-86,545

-345,448

Opening Stock
Work- in - progress
Finished Goods

Less: closing stock

Work- in - progress
Finished Goods
Less: Excise duty
Net closing
Stock(B)
Movement in the
opening and closing
stock(A-B)

INVENTORY

TURNOVER

OR STOCK TURNOVER RATIO

Every firm has to maintain certain level of inventory of finished goods

so as to be able to meet the requirements of the business. But the
level of inventory should neither be too high nor too low.
Inventory turnover ratio will indicate whether the inventory has been
efficiently used or not. The purpose is to see whether only the required
minimum funds have been locked up in the inventory. Inventory
turnover ratio indicates the number of times the stock has been turned
over during the period and evaluates the efficiency with which a firm is
able to manage its inventory.

62

Inventory turnover ratio

=

Cost of goods sold

Average inventory at
stock

Opening stock + Closing

Average inventory at
Stock
cost=
2
INTERPRETATION OF INVENTORY TURNOVER RATIO
Inventory turnover ratio measures the velocity of conversion of stock
into sales. Usually, a high inventory turnover indicates efficient
management of inventory because more frequently stocks are sold;
the lesser amount of money is required to finance the inventory. A low
inventory turnover ratio indicates an inefficient management of
inventory. A low inventory turnover implies over-investment in
inventories, dull business, poor quality of goods, stock accumulation,
accumulation of obsolete and slow moving goods and low profit are
compared to total investments.

INVENTORY TURNOVER RATIO OF NESTLE INDIA LIMITED FOR LAST TWO

YEARS

YEAR

2011

2010

63

Cost of goods sold

Average Inventory
at cost

16465167

13563778
2444844

2660840.5

Inventory turnover
ratio

6.18 times

5.54 times

365

Inventory conversion
Period =

Inventory turnover ratio

Inventory
conversion period

59 days

66 days

The Inventory conversion period has shifted from 66 days in 2010 and
59 days in 2011 which shows that the company is efficiently managing
their stock and its inventory turnover has also increased which shows
that there is rise in sale.

NET PROFIT

RATIO

Net profit ratio establishes a relationship between net profit (after tax)
and sales, and indicates the efficiency of the management in the
manufacturing, selling, administrative and other activities of the firm.
This ratio is the overall measure of firms profitability and is calculated
as:

Net Profit Ratio

Net profit

X 100

Sales
64

The two basic elements of the ratio are net profit and sales. The net
profits are obtained after deducting income-tax and, generally, nonoperating income and expenses are excluded from the net profit for
calculating this ratio. Thus, incomes such as interest on investment
outside the business, profit on sale of fixed assets, etc. are excluded

NET PROFIT RATIO OF NESTLE INDIA LIMITED FOR LAST TWO YEARS

Years

2011

Net profit
Sales

Net profit
ratio

2010
6550

51293767

5341

43242450
.0127

.
0123

There is no much difference in the net profit ratio of year 2010 and
year 2011 as the net profit and the sale has increased in the same
proportion so there is not much difference in the net profit ratio of the
company.

DEBT EQUITY RATIO

Debt equity ratio also known as External-Internal Equity Ratio is
calculated to measure the relative claims of outsiders and the owners
(i.e. shareholders) against the firms assets. This ratio indicates the
relationship between the external equities or outsiders funds and the
internal equities or the shareholders funds, thus
65

Debt-Equity Ratio

Outsiders funds

Shareholders funds

The two basic components of the ratio are outsiders funds i.e.,
external equities and shareholders funds, i.e. internal equities.
INTERPRETATION OF DEBT EQUITY RATIO
The debt equity ratio is calculated to measure the extent to which debt
financing has been used in the business. The ratio indicates the
proportionate claims of owners and the outsiders against the firms
assets.
Generally speaking, a low ratio is considered as favorable from the
long- term creditors point of view because a high proportion of owners
fund provides a larger margin of safety for them. A high debt equity
ratio which indicates that the claims of outsider are greater than those
of owners, may not be considered by the creditors because it gives a
lesser margin of safety for them at the time of liquidation of the firm.

DEBT EQUITY RATIO FOR NESTLE INDIA LIMITED FOR LAST TWO YEARS
Years

2011

2010

Outsiders funds

5,875,90

5,074,671

Shareholders Funds

5,812,650

4,733,497

Debt equity ratio

1.01

1.07

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CHAPTER-6
Findings

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Findings:
Final dividend of Rs 12.50 per equity share of the face value of
Rs.10/- year 2011, amounting to Rs. 1,205 Million.
The current ratio for the company in the year 2010 was 0.67 and
for the year 2011 was 0.60. So the current ratio for the firm has
decreased by 0.07 which indicates that the companys liquidity
position is decreasing.
The quick ratio of the company in 2011 was .251 and 2010 was .
306 shows that the quick ratio of the company has decreased
by .55 because the company has purchased assets by the bank
balance as the company has not taken any loan during the year
so the quick ratio of the company decreased.
The Inventory conversion period has shifted from 66 days in 2010
and 59 days in 2011 which shows that the company is efficiently
managing their stock and its inventory turnover has also
increased which shows that there is rise in sale.
There is no much difference in the net profit ratio of year 2010
and year 2011 as the net profit and the sale has increased in the
same proportion so there is not much difference in the net profit
ratio of the company.
The Indian food industry is estimated to be worth over INR 8,
80,000 crores.
Dividend payout ratio by nestle is over 70 % in last 20 year

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CHAPTER-7
Suggestions and Recommendations

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Suggestions and Recommendations:

Employee should be trained according to the changing
standards of the organization.
Company should conduct survey from time to time,
according to which changes can be introduced in the
organization to stay updated in the market.
They should introduce creativity into the work, so that the
employees can do their work active mindedly.
Employee should be given compensation in order to keep
them loyal.
Employee should be more involved in decision making to
become more differentiated.
Company should provide incentives to shop keepers.

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Conclusion
NESTLE good food, good life captures the very essence of Nestle and
the promises they commit to themselves every day, everywhere as the
leading nutrition, health and wellness company.
The companys overall is at a very good position. The company
achieves sufficient profit in past two years. The company maintains
low liquidity to achieve the high profitability. The company distributes
dividend every year to its shareholders.
The company grew significantly during these years. There were many
new products and services that were launched during this time. The
company enjoys monopoly in various products, i.e. significant is the
name of Maggi noodles in this section. Increased demand of products
helps the company remain strong. The changing lifestyle and concepts
of Indians have contributing much to the growth of the company.

71

Bibliography

Annual Report of Nestle India Limited.

Internal Audit report of Nestle India Limited.
Rustagi R.P.-Financial Management (Galgotia, 2000, 2nd revised ed.)
Jain S.P. , Narang K.L.-Accounting and financial analysis (Kalyani,
2008 edition.)
Gupta Shashi K, Sharma R.K.-Financial Management
Shukla M.C. , Grewal T.S.-Advanced Accounts
www.nestle.in
www.google.com

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