COLGATE

A Financial analysis report on

PROJECT GUIDE:PROF. SHREEDA SHAH

SUBMITTED BY: NAME : Mayur P. Barot CLASS : S.Y. B.B.A

DIVISION : A ROLL NO : 09SUBMITTED TO:

Opp. Law garden, Ellis bridge Ahmedabad-380006

PREFACE1 | P a g e

The financial manager is not in a passive role of scorekeeper of the accounting information and arranging fund. Whenever directed to do so he occupies a key position in top management and plays a dynamic role in solving the complex management problem, he is how responsible for shaping the fortunes of enterprise & is involved in The subject matter of financial management has been changing at a repaid pace about three decades ago, the scope of financial management was circumscribed to the raising of fund, whenever needed if little significance used to be attached to the financial decision making of problem solving the mid fifties, the emphasis shifted to wise utilization of fund. The “Modern” thinking in financial management gives greater IMPORTANCE TO MANAGEMENT gives grater importance to management and decision making policy. Today the most vital management decision of allocation of capital. The new economic e-

Forms created a challenging environment in the economics.

A number of new tools & techniques have been

developed to meet the needs of modern business that works in complex environment. A no of old science has been developed on fresh limes to meet the requirements of modern business. We as a student management can not keep over selves isolated from this filed of financial management we nee to know the practical application of or other theoretical knowledge so I have prepared a financial report on “ COLGATE-PALMOLIVE LIMITED.” & have tried to analysis each report of annual report of three successive year & put it in a logical format as per analysis.

ACKNOWLEDGEMENT2 | P a g e

In our course, as part, we have to prepare financial report on a company; I have prepared the report on “THE COLGATE-PALMOLIVE LIMITED”

It’s my honor to prepare report on India’s no.1 textile industries. I would like to thank our Prof. Mrs. Shreeda shah who gave us guidance & enough information to finish our project easily. I would also like to thank our director sir V.B.Patel for giving us the opportunity to show our talent in financial field.

Mayur P. Barot S.Y. B.B.A DIV.: A

ROLL NO: 09

INDEX

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NO. PARTICULARS PAGE NO.

1. HISTORY OF THE COMPANY 5

2. COMPANY’S BACKGROUND 6

3 INTERNATIONAL EXAPATION 9

4 COMPANY OVERVIEW 11

5 DIRECTOR’S REPORT 13

6 BUSINESS PERFORMANCE 14

7 AUDIT REPORT 22

8 RATIO ANALYSIS 26

9 PROFIT & LOSS ACCOUNT 86

10 BALANCE SHEET 89

11 COMMON SIZE STATEMENT 92

12 CASH FLOW STATEMENT 96

13 CONCLUSION 100

14 BIBLIOGRAPHY 101

HISTORY OF THE COMPANYPublic Company Incorporated: 1806 as The Colgate Company Employees: 36,000 Sales: $19.45 billion (2009) 4 | P a g e

Stock Exchanges: New York Euro next Frankfurt London Zurich Ticker Symbol: CL NAIC: 311111 Dog and Cat Food Manufacturing; 325611 Soap and Other Detergent Manufacturing; 325612 Polish and Other Sanitation Good Manufacturing; 325620 Toilet Preparation Manufacturing; 325998 All Other Miscellaneous Chemical Product and Preparation Manufacturing; 335211 Electric House wares and Household Fan Manufacturing; 339994 Broom, Brush, and Mop Manufacturing

Colgate-Palmolive Company's growth from a small candle and soap manufacturer to one of the most powerful consumer products giants in the world is the result of aggressive acquisition of other companies, persistent attempts to overtake its major U.S. competition, and an early emphasis on building a global presence overseas where little competition existed. The company is organized around four core segments—oral care, personal care, home care, and pet nutrition—that market such well-known brands as Colgate toothpaste, Irish Spring soap, Soft-soap liquid soap, Mennen deodorant, Palmolive and Ajax dishwashing liquid, Ajax cleanser, Murphy's oil soap, Fab laundry detergent, Soup line and Suavity fabric softeners, and Hill's Science Diet and Hill's Prescription Diet pet foods. Colgate-Palmolive has operations in more than 200 countries and generates about 70 percent of its revenue outside the United States.

Bayard Colgate as president in 1933.

COMPANY BACKGROUND

Name of the company: COLGATE-PALMOLIVE LTD.

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Home Registered office:

300 Park Avenue New York, New York 10022-7499 U.S.A. Telephone: (212) 310-2000 Toll Free: (800) 850-2654 Fax: (212) 310-2475

Registered office: Colgate research center, Main street, hirnandani gardens, Powai, Mumbai-40056 Factories:

1. Plot. B14/10 MIDC Waluj industrial Area Aurangabad-431136

2. Plot no. 78 EPIP phase 1 Jharmajri, baddi Solan HP-174103

3. Plot no. 154, 158, &160 Kunai industrial estate, Goa-403115.

Board of Directors:

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Chairman D.

Samuel

Vice-Chairman R. A.

Shah

Deputy Chairman P. K.

Ghosh

Managing Director M. V. Deoras

Whole-time Director M. A. Elias

Whole-time Director K. V. Vaidyanathan

J. K. Setna

V. S. Mehta

Company Secretary: K. V. Vaidyanathan

Management Committee:

Managing Director M. V. Deoras

Financ e M. A. Elias

Legal K. V. Vaidyanathan

Marketing R. Krishnamurthy

Shareholders’/Investors’ Grievance Committee Chairperson:

P. K. Ghosh

M. V. Deoras

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J. K. Setna

K. V. Vaidyanathan

Auditors:

Price Waterhouse

Chartered Accountants

Registrars & Share Transfer Agents:

Sharepro Services (India)

Private Limited

Report of the DirectorsToThe MembersColgate-Palmolive (India) LimitedYour Directors have pleasure in presenting their Report and Audited Accounts of the Company for the year ended March 31, 2010.

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International Expansion

Colgate & Company had been a pioneer in establishing international operations, creating a Canadian subsidiary in 1913 and one in France in 1920. In the early 1920s the firm expanded into Australia, the United Kingdom, Germany, and Mexico. Colgate or its successor firm next created subsidiaries in the Philippines, Brazil, Argentina, and South Africa in the late 1920s. In 1937 the company moved into India and by the end of the 1940s had operations in most of South America. By 1939 Colgate-Palmolive-Peet's sales hit $100 million.

In the 1940s and 1950s the company also built upon its strategy of growth by acquisition, buying up a number of smaller consumer product companies. Organic growth remained on the agenda as well, and in 1947 the company introduced two of its best-known products, Fab detergent and Ajax cleanser. These acquisitions and new products, however, did little to close the gap between Colgate and its arch-rival, the Procter & Gamble Company, a firm that had been formed in the 1830s and had by now assumed a commanding lead over Colgate in selling detergent products in the United States. Meanwhile, the firm adopted its present name in 1953 and moved its offices for domestic and international operations to New York City in 1956.

In 1960 George H. lest was appointed Colgate's president in the hopes that his international experience would produce similar success in the domestic market. Under his leadership, the company embarked upon an extensive new product development program that created such brands as Cold Power laundry detergent, Palmolive dishwashing liquid, and Ultra Bite toothpaste. In an attempt to expand beyond these traditional, highly competitive businesses into new growth areas, Colgate also successfully introduced a new food wrap called Baggies in 1963. As a result of these product launches, the company's sales grew between 8 and 9 percent every year throughout the 1960s. Sales topped the $1

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billion mark in 1967.

Lest assumed the chairmanship of Colgate, and David Foster became president in 1970 and CEO in 1971. Foster was the son of the founder of Colgate-Palmolive's U.K. operations. He joined the company in 1946 as a management trainee and rose through the sales and marketing ranks both in the United States and overseas.

Company overview: Colgate Palmolive (India) ltd.

Colgate-Palmolive is Rs1, 300 crore company started in year 1937.In Rs2, 400 crore domestic market it enjoys 50% of market

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share. It spread across 4.5 million retails outlets out of which 1.5 million are direct outlets.

The Company is having four wholly owned subsidiaries namely Colgate-Palmolive (Nepal), Multimint Leasing & Finance and Jigs Investments and Passion Trading & Investment Company.

In November 2007, it acquired a 75% equity interest in Advanced Oral Care Products, Professional Oral Care Products and SS Oral Hygiene Products, the company is the fastest growing and one of the oldest companies catering to the personal care products.The company is regularly coming up with new products and has been a consintent financial performer.

Products

Oral care-Under this segment the company offers product like toothpastes, toothbrush, tooth powder & tooth whitening products.

Personal care -In this segment it offer products skin care, hair care, body wash, & shaving creams

Household care-Under this segment it has launched brand AXIOM-a dish washing paste.

It has also introduced new products namely Colgate dental floss, ORAGARD-B a mouth ulcer cream etc.

Milestone

In 2003 Colgate was ranked as India’s Most Trusted Brand across all categories by Brand Equity’s Most Trusted Brand Survey for four consecutive years from 2003 to 2007.

Colgate was also rated as the number one brand by the A&M – MODE Annual Survey for India’s Top Brands for eight out of nine years during the period 1992 to 2001.

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DIRECTORS’ REPORT

Financial Results (Rs. Crore) 2009-10 2008-09

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2,060.921,962.4698.46

Total Revenue Sales(Excluding Excise Duty)Other IncomeProfit before Taxation Provision for Taxation Profit after TaxationBalance brought forwardProfit available for appropriation AppropriationDividend Dividend TaxGeneral TaxBalance carried forward

BUSINESS PERFORMANCE

Your Company’s strong performance continued in 2009-10 despite difficult economic conditions. In a year marked by volatile

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1,802.571,694.81107.76

345.3155.09290.225.77295.99

484.8061.54423.2628.84452.10

271.9845.8442.3391.45452.10

203.9934.1429.0228.84295.99

financial and growth during the year 2009-10. Sales for the year increased by 16 per cent at Rs. 1,962 crore during the previous year. The toothpaste business registered an impressive volume growth of 14 per cent during the year.The profit after tax for the financial year 2009-10 grew by an impressive 46 per cent to Rs. 423 crore as against Rs. 290 rore in the previous year.The underlying performance can be gauged from the following ratios: 2009-10 2008-09 Eamings per share (Rs.) 31.1 21.3

currency markets. Your Company achieved a healthy double digit Sales Dividend per share (Rs.) 20.0 15.0 Return on Capital Employed (%) 156.9 155.0During the year generation continued to be very strong arising from significant improvements in the business performance, efficiencies and cost saving across the organization and a continued efficient collection system. Your Company managed investments prudently by deployment of surplus funds after ensuring that such investments satisfy the Company’s criteria of safety and liquidity.

Your Company’s market shares are improving steadily. These it creases are driven by our strong focus on understanding our consumers, working with our retail customers. Your Company also continued to focus on driving innovation throughout all areas of business, increasing effectiveness and efficiency everywhere and strengthening the leadership competency of the team. The sharp ‘focus on these four clearly defined strategy initiative, helped your Company continue to maintain its leadership position in the oral care market.Your Company is positioned well for the future on account of its financial strength, market leadership position, a proven business strategy that has helped your Company succeed in strong and weak economic environment team of people working together to achieve the Company’s business goals.

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1. Dividend The Company’s strong cash generation and positive growth momentum led your Board to declare three interim dividends of Rs. 7 and Rs. 5 per share aggregating Rs.20 per share

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for the financial year 2009-10 as against Rs.15 per share in the previous year-a 33 per cent increase. These dividends were paid on September 4 and December 28, 2009 and April 23,2010. Having declared three interim dividends, your Board has not recommended a final dividend for the financial year 2009-10.

2. Responsibility Statement

Pursuant to Section 217(2AA) of the Companies Act, 1956 the Directors based on the representations received from the Operating Management confirm:

a) That in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same,

b) That they in selection of the accounting policies consulted the statutory auditors and have applied them consistently and made judgments and estimates that are reasonable and p....... so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period,

c) That to the best of their knowledge and information. They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act.1956 for safeguarding the assets of the Company and for prevented and detecting fraud and other irregularities .

d) That they have prepared the annual accounts on a going concern basis.

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3. Subsidiary Companies

Your Company was holding 75 per cent shareholding in Processional Oral Care Products Private Limited at Goa (‘POC’) engaged manufacture of toothpaste. During the year, Company acquired the remaining 25 per cent shareholding at a total consideration of Rs.2.40 crore and proposed Amalgamation of POC with your Company. The Scheme of Amalgamation of POC with your Company was sanctioned by the Bombay High Court at Goa vide its order dated April 16, 2010 with retrospective effect from April 1, 2009. Being the Appointed Date under the Scheme of Amalgamation.Your Company was also holding 75per cent of the shareholding in CC Health Care Products Private Limited at Hyderabad (‘CCHL’) engaged in the manufacture of toothpowder. During the year your Company acquired the remaining 25 per cent shareholding at a total consideration of Rs.69.07 laces and initiated steps before the Andhra Pradesh High Court for amalgamation of CCHL with your Company effective from April 1, 2009, being the Appointed Date under the Scheme of Amalgamation.The amalgamation of subsidiaries is primarily designed to simplify the corporate structure and no material impact either in terms of operations or in terms of capital structure of the Company.

4. Corporate Social Responsibility

Your Company in partnership with the Indian Dental Association (ADI) successfully concluded the 6’’ edition of a two month long Oral Health Month Program during the year covering a wide spectrum of activities designed to spread oral health awareness and good oral hygiene practices. The mission of Program continued to be “Zero Tooth Decay” involving 17,500 dental professionals pread across 1,000 towns. This year the program extended is support to NCOs like Pratham, Akshara Foundation, Save the Children, and Salaam Balak Trust among others by conducting free dental check-ups for NGO workers and children and distributing free samples. In addition,

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free dental check-ups were conducted for the Indian Coast Guard in Chennai.Education has been the primary focus of your Company’s Corporate Social Responsibility. Since 1976. Your company has been conducting a school education program (now called Bright Smiles Bright Futures Program) wherein your Company partneredWith IDA, to spread oral awareness among school going children in urban and rural schools. Till date, 83 million school children in 1, 73,000 schools in 250 towns in urban and rural areas have benefited from this program. In addition, your company also conducts in conjunction with IDA a teachers training program to enable teachers to instill good oral care habits among school-going children on a going basis. Till date, 2, 43,500teachers have undergone this training. Since 2002, your company partnered with pratham, a non-profit organization, to promote academic education of the less privileged children. The grant from the company has supported the concept of libraries in the “s” ward of Mumbai where children are encouraged to read books to enhance their knowledge and continue their academic education.Your company started supporting the children affected and in affected by HIV with nutritional needs and school fees since last two years. The program has infused the children with hope leading to a definitive improvement in their academic performance.Your Company will continue to take such measures to make a positive and significant contribution to the society.

5. Corporate Governance

A separate report on Corporate Governance along with the Auditors certificate on its compliance is attached as Annexure 1 to this Report.18 | P a g e

6. Employee Relations

The employee relations in the Company continued to be positive. During the year, a productivity-linked long-term settlement was signed with the Aurangabad Factory Union through a process of bilateral negotiations.Information as per Section 217(2A) of the Companies Act, 1956 (‘the Act’) read with the Companies (Particular of Employees) Rules , 1975 forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Act, the Report and Accounts are being sent to the shareholders of the Company excluding the statement on particulars of employees under Section 217(2A) of the Act. Any shareholder interested in obtaining the copy of said statement may write to the Secretarial Department at the Registered Office of the Company.

7. Trade Relations Wish to record appreciation of the continued unstinted support and co-operation from its Your Directors retailers, stockiest, suppliers of goods/services, clearing and forwarding agents and all others associated with it. Your Company will continue to build and maintain strong links with its business partners.

8. Energy, Technology Absorption and Foreign Exchange

The information required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of 19 | P a g e

Particulars in the Report of the Directors) Rules, 1988 with respect to conservation of energy, technology absorption and foreign exchange earnings/ outgo is appended hereto as Annexure 2 and forms part of this Report.

9. Directors

Effective February 1, 2010 Mr. Mukul Deoras was appointed as the Managing Director of the Company to succeed Mr. Roger Calmeyer, who stepped down as the Managing Director of the Company effective January 31, 2010 to retire from the services of the Corporation. The appointment of Mr. Deoras is subject to the approval of the shareholders and the Central Government under the provisions of the Companies Act, 1956. The Board places on record their appreciation for the distinguished services rendered by Mr. Calmeyer during his tenure with the Company.Effective April 1, 2010 Mr. Derrick Samuel has been appointed as Director and Chairman of the Board to succeed Mr. Justin skala, who has stepped down to head the Latin America Division of the Corporation. The Board, while welcoming Mr. Samuel, places on record their appreciation for the distinguished services rendered by Mr. Skala during his tenure with the Company.

Under Article 124 of the Company’s Articles of Association, Mr. P.k. Ghosh and Mr. M.A. Elias retire by rotation at the 69th Annual General Meeting and, Being eligible, offer themselves for re-appointment.

10. AUDITORS

Messrs. Price Waterhouse, Chartered Accountants, retire and eligible for re-appointment as Auditors.

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11. ACKNOWLEDGEMENT

Your Directors sincerely appreciate the high degree of professionalism, commitment and dedication displayed by employees at all levels. The Directors also wits to place on record their gratitude to the Members for their continued support and confidence.

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To the Members of Colgate-Palmolive (India) Limited.22 | P a g e

1. We have audited the attached Balance Sheet of Colgate-Palmolive ( India) Limited (“ the Company”) as at March 31,2010 and related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report . These financial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amount and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management. as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the companies (Auditor’s Report) Order, 2003. As amended by the companies (Auditor’s Report) (Amendment) Order, 2004 (together the “Order”). Issued by the Central Government of India in terms of sub – section (4A) of Section 227 of the Companies Act, 1956 of India (the “Act”) and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

4. Further to our comments in the Annexure referred to in 23 | P a g e

paragraph 3 above, we report that:

(a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit;(b) In our opinion proper books of account as required by law have been kept by the company so far as appears from our examination of those books;

(c) The Balance Sheet, Profit and Loss Account and Cash Flow statement dealt with by this report comply with the accounting standards referred to in sub – section (3C) of Section 211 of the Act;

(e) On the basis of written representations received from the directors, as on March 31, 2010 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2010 from being appointed as a director in terms of clause (g) of sub – section (1) of Section 274 of the Act;(f) In our opinion and to the best of our information and explanations given to us, the said financial statements together with the notes thereon and attached thereto give, in the prescribed manner, the information required by the Act, and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the

Company as at March 31, 2010;(ii) in the case of the Profit and Loss Account of the Profit

for the

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Year ended on that date; and

(iii) In the case of the Cash Flow statement, of the cash flows for the year ended on that date

For price Waterhouse Firm Registration No.301112E

Chartered Accountant

Partha Ghosh Partner

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Meaning Of Ratio Analysis:

“One of the most importance methods of analysis of 26 | P a g e

financial statement is Ratio Analysis”. Ratio Analysis is a in numerical figure which is used to find out relationship between different statements. Single statement carries no meaning.Example : If the profits of company A are Rs, 100000 and company B are Rs. 150000 and if one is asked which company is doing better, naturally the answer would be company B. But it is an incomplete answer unless and until the figures of profits are related with either the volume of capital employed or sales. It carries no message. Therefore if sales for company A is Rs. 200000 and for company B Rs. 450000 then the result would be as follows.

Ratio analysis is a widely used tool of financial analysis. The relation between two accounting figures, expressed mathematically, is known as Financial Ratio. In financial analysis, a ratio is used as a benchmark for evaluating the financial position and performance of a firm. From the ratio analysis one can get further insight about financial strength and weaknesses of the firm. Management, creditors, investors and others calculate the ratio to form judgment about the operating performance and financial position of the firm.

The absolute accounting figures reported in the financial statement do not provide a meaningful understanding of the performance and financial position of a firm. An accounting figure conveys the meaning when it is related to some other relevant information.

Advantage of Ratio Analysis :- There are various

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groups of people who are interested in analysis of financial position of a company. They use the ratio analysis to find out a particular financial characteristic of the company in which they are interested. Ratio analysis helps the various groups in the following manner:

1) To Find out profitability : Accounting ratio helps to calculate the profitability of business by calculating the various profitability ratios. It helps the management to know about the earning capacity of the firm. In this way profitability ratio show the actual performance of the business.

2) To Find out the solvency : With the help of solvency ratios, solvency of the company can be calculated. These ratios show the relationship between the liabilities and the assets.

3) Helpful in analysis of financial statement : Ratio analysis helpful the outsider like creditor, share holder, debenture holder, bankers to know about the profitability and ability of the firm to pay them interest, dividend, etc.

4) Helpful in comparative analysis of the performance : With the help of ratio analysis, the company may have comparative 28 | P a g e

study of its performance to the previous years. In this way company comes to know about its weak point and able to improve them.

5) To simplify the accounting information : Accounting ratios are very useful as they briefly summaries the result of detail and complicated calculation.

6) To know about the efficiency : The ratio analysis helps to know the operating efficiency of the company with the help of various turnover ratios. All turnover ratios are calculated to evaluate the performance of the business in utilizing the resource.

7) To know about the liquidity position : Ratio analysis helps to know the short term financial position (liquidity position) of the company with the help of liquidity ratio. In case short term financial position is not good, effort are made to improve it.

8) Helpful for forecasting purpose : Accounting ratio indicates the trend of the business. With the help of previous year’s ratios,

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estimates ratios for future can be made. In this way, ratio provides the bases for preparing budget and help for future course of action.

Disadvantage of ratio analysisDisadvantage of ratio analysis :: In spite of many advantage there are many limitation of ratio analysis techniques and they should be kept in mind while 30 | P a g e

using them in interpreting financial statement. The following are the limitations of accounting ratio.

1) FALES RESULT : Accounting ratios are bases on data taken from books of accounting. In case that data is incorrect then only the ratios will be incorrect. The data therefore must be absolutely correct.

2) LIMITED COMPAREBILIYT : Difference firm apply difference accounting policy. Therefore the ratio of one firm can not always be compared with the ratio of other firm. Some firm may value the closing stock on first into bases while some other firm similarly there may be difference in providing deprecation on fixed assets on certain provision also.

3) AFFECT PRICE LEVEL CHANGES :

The prize level changes often make the comparison difficult over a period of time. Changes in prize affect the cost of production, sales and also the value of assets. Therefore it is necessary to make proper adjustment for prize level changes before any comparison.

4) QUALITATIVE FACTOR ARE IGNORED : Ratio analysis is technique of quantitative analysis and thus ignores qualitative factors which may be important in decision making. E.G.: Average collection period may be equal to standard credit period but some debtors may be in the list of doubtful debt, which is not disclosed while, ratio analysis.31 | P a g e

5) EFFECT OF WINDOW DRESSING : In order to cover-up their bed financial position. Some companies use window dressing. The main record the accounting data according to the conventions to show the financial position of the company in a better way costly teach.

6) COSTLY TECHNIQUE : Ratio analysis is a costly technique in business houses. Small business units are not able to effort it.

7) ABSENCE OF DATA: In the absence of absolute data, the result may be misaligning. E.G: the gross profit of two firms is 25% where the profit earned by one firm is just Rs: 5000 & sales are Rs: 20000. Profit earned by other firm is Rs: 10, 00,000 and sales Rs: 40, 00,000 even the profit of the firm is same but the magnitude of their business is guide different.

8) ABSENCE OF STANDERED UNIVERSITY ACCEPTED TERMINOLOGY:

There are no standard ratios, which are universally accepted for cooperation purpose. As, such the significance of ratio analysis techniques is reduce.

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Classification of ratio:

1. Liquidity Ratio2. Profitability Ratio33 | P a g e

3. Leverage Ratio 4. Activity or Efficiency Ratio5. Coverage Ratio

1. Liquid Ratio a. Current Ratio b. Liquid Ratio

2. Profitability Ratio A. In Relation To Salesa. Gross Profit Ratio b. Net Profit Ratio c. Operating Ratiod. Expenses Ratio

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B. In Relation To Investment a. Return on Capital Employedb. Return on Share holders Fund

C. In Relation To Equity Share holders a. Earning Per Shareb. Dividend Per Sharec. Price Earningsd. Return on Equity Share holders Fund

3. Leverage Ratio a. Debt Equity Ratiob. Proprietary Ratioc. Gearing Ratiod. Long Term Fund To Fixed Assets Ratio

4. Activity or efficiency Ratio a. Stock turnover Ratiob. Working Capital Turnoverc. Debtors Ratiod. Creditors Ratioe. Total Assets Turnover Ratiof. Book Value Per Share

5. Coverage Ratio a. Debt Services Coverage Ratiob. Interest Coverage

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1. GROSS PROFIT Ratio

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Meaning: This ratio shows the relationship between gross profit & net sales.

Objective: The main objective of computing this ratio is to find out the efficiency with which production or purchase operation are carried on.

Components: There are two components of this ratio which are as under:

1. Gross Profit Which is the access of net sales over cost of goods sold. I.e. Net Sales – Cost Of Goods Sold = Gross Profit

Cost of goods sold = Opening stock + Net purchases (purchase – purchase expenses) + Direct expenses

– Closing stock2. Net Sales Which means gross sales – Sales return

Calculation:This ratio is calculated by dividing the gross profit by net sales. It is expressed as percentage.

(in lacs)37 | P a g e

Calculation: -

Year 2007-08 2008-09 2009-10

Gross profit 84060.25 95350.59 118561.63

Net sales 147337.90 169481.35 196245.92

Gross profit ratio 57.05% 56.26% 60.41%

Interpretation: -

Here gross profit ratio decreased in 2008-09.which shows efficient use

of raw material and there is decrease in manufacturing expenses. It means

that a low ratio suggests that the firm is not able to buy at reasonable prices

or that the cost of production is not under control. The firm has to work

better for it and reduce its cost of production.

This ratio indicates

A. An average gross margin earned on a self of RS.100

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B. The limit beyond which the fall in selling prise definitely result in losses.

C. What portion of sales is to cover operating expenses (Other than the

COGS) and non operating expenses. Higher the ratio, the more efficient

in production and purchase management. This ratio may increase due to

one of the following factor:

1. Higher selling prise with constant cost of goods sold.

2. Lower cost of goods sold with constant selling price.

3. A combination of above two factors.

2. NET PROFIT RATIO :

Meaning: This ratio measures the relationship between net profit & net

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sales.

Objective: The main objective of computing this ratio is to determind the

overall profitability due to various factors such as operational efficiency, trading on equity etc.


1. Net Profit2. Net Sales

Calculation: This ratio is calculated by dividing the net profit by net sales.

It is expressed as percentage. In the form of a formula this ratio may be expressed as under:

(in laces)

Calculation: -Year 2007-08 2008-09 2009-10

Net profit 23171.02 29021.94 42325.82

Net sales 147337.90 169481.35 196245.92

Net profit ratio 15.73% 17.12% 21.57%

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Interpretation: -

Here in the three years the net profit ratio of the company shows

downward trend. It shows profitability of firm and management of the firm

is not efficient this suggest that company is not satisfactory position and can

be harmful for the company.

This ratio indicates

A. An average net margin earned on a sale of Rs.100.

B. What portion of sales is left to pay dividing & to create reserves.

C. Firm’s capacity to face adverse economic condition when selling price

declining, cost of production is increasing & demand for the product is

decreasing.

Higher the ratio greater is the capacity of the firm to face adverse

economic condition and vice-versa.

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3.Return on Capital Employee :

Meaning: This ratio measures a relationship between net profit before

interest & tax and capital employed.

Objective: The objective of calculating this ratio is to find out how

efficiently the long term fund supplied by the creditors & shareholders has been used.

Components: There are two Components of this ratio which are as under:

1. Net Profit Before Interest & Tax2. Capital Employed Which Refers to long term fund supplied by

the long term creditors & shareholders. It comprises the long term debts & shareholder’s fund.

Calculation: This ratio is calculated by dividing the net profit before

interest & tax by capital employed. This is expressed as percentage. In the form of a formula this ratio may be expressed as under:

Calculation of Capital Employed = Equity Share Capital + Preference Share Capital + Reserves & Surplus + Profit & Loss A/C Credit balance + Long term debt – Fictitious Assets.

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(in lacs)

Year 2007-08 2008-09 2009-10

Net profit(BIT) 29204.91 34530.65 48479.85

Cap employed 16220.62 21629.57 32611.16

Returns 180.05% 159.65% 148.66%

Interpretation:This ratio indicates the ability of the firm to generate profit per rupee

on capital employed. Higher the ratio the more efficient the management & utilization of capital employed.

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4. Return on Shareholder’s Fund :

Meaning: The ratio measures the relationship between net profit after

interest, tax & shareholder’s fund.

Objective: The objective of computing this ratio is to find out how efficiently the fund invested by the shareholders has been used.

Components: There are two components of this ratio as under:

1. Net Profit after Interest & Tax (PAT)2. Shareholder’s Fund which mean

Equity share capital + Preference share capital + Reserves & surplus+ P&L A/c credit balance – Fictitious assets.

Calculation: This ratio is calculated by dividing the net profit after interest

and tax by shareholder’s fund. It is expressed as percentage. In the form of a formula this ratio may be expressed as under:

(in lacs)

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Year 2007-08 2008-09 2009-10

Net profit(PAT) 23171.02 29021.94 42325.82

Shareholder’s fund 16220.62 21629.57 32611.16

Returns 142.85% 134.18% 129.79%

Interpretation: This ratio indicates the firm’s ability to generating profit per

rupee of shareholder’s fund. Higher the ratio the more efficient funds.

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5. Return on EquitShareholder’s Fund :

Meaning: This ratio measures a relationship between net profit after

interest, tax and preference dividend and equity shareholder’s funds.

Objective: The objective of computing this ratio is to find out how efficiently

the funds supplied by the equity shareholder’s have been used.

Components: There are two components of this ratio they are as under:

1. Net Profit after Interest, Tax & Preference dividend2. Equity Shareholder’s Fund which means

Equity Share Capital + Reserves & Surplus + P&L A/c Credit Balance – Fictitious Assets

Calculation: This ratio is calculated by dividing the net profit after interest

& tax and preference dividend by equity shareholder’s fund. It is expressed as percentage. In the form of a formula this ratio may be expressed as under:

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(in lacs)

Calculation:

Year 2007-08 2008-09 2009-10

Net profit(PAT) 23171.02 29021.94 42325.82

Eq. Shareholder’s fund 16220.62 21629.57 32611.16

Returns 142.85% 134.18% 129.79%

Interpretation: Return on equity share holder fund was 36.55%in 2006-07

which increased 40.41% and again decreased to 33.11% it indicates that

fund which is provided by the owners have been not used properly by the

firm which can be unsatisfactory for the company in the future.

This ratio indicates the firm’s ability of generating profit per rupee of equity shareholder’s fund. Higher the ratio the more efficient the & proper utilization of equity shareholder’s fund.

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6. Operating Ratio :

Meaning: This ratio measures a relationship between operating cost and net

sales.

Objective: The main objective of computing this ratio is to determined the

operational efficiency with which production or purchase & selling operations are carried on.


1. Operating cost consisting two elementA. Cost of Goods SoldB. Other Operating expenses

Ex. Administrative expenses, selling & distribution expenses, interest on short term loans, discount allowed and bed debts, net sales (Gross Sales – Sales Return)

2. Net Sales

Calculation: This ratio is calculated by dividing the operating cost by net

sales. This ratio is expressed as percentage. In the form of a formula this ratio may be expressed as under:

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(in lacs)

Year 2007-08 2008-09 2009-10

COGS 63277.65 74130.76 77684.29

Operating exp 33152.65 36313.73 40310.73

Net sales 147337.90 169481.35 196245.92

Operating ratio 65.45% 65.17% 60.13%

Interpretation:This ratio indicates an average operating cost incurred on sales of

goods worth Rs. 100. Lower the ratio, greater is the operating profit to cover the operating expense to pay dividend and to create reserves & vice-versa.

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7.Expenses Ratio :

Meaning: This ratio measures the relationship between different types of

ratio with expenses & net sales.

Objective: The main objective of computing different types of expenses

ratio is the efficiency or otherwise the incurrence of different types of expenses.

Components: There are two components of this ratio which are as under:1. Different type of expenses2. Net Sales

Calculation: This ratio is calculated by dividing different types of expenses

by the net sales. This ratio is expressed as a percentage. In the form of a formula this ratio may be expressed as under:

Interpretation:This ratio indicates an average expenses incurred on sales of goods

worth Rs.100. Lower the ratio, greater is the operating profit to cover operating expenses, to pay dividend and to create reserves & surplus & vice-versa

8. EARNING PER SHARE Ratio

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Meaning: This ratio measures the earnings available to an equity

shareholder on a per share basis.

Objective: The objective of calculative this ratio is to find out the

profitability of the firm on per equity share basis.

Components: There are two components of this ratio which are as under:1. Net Profit after Interest, Tax & Preference dividend2. No. of equity Shares

Calculation: This ratio is calculated by regarding the net profit after

interest, tax and preference dividend by the no. of equity shares. It is expressed as absolute figure. In the form of a formula this ratio may be expressed as under:

(in lacs)

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Year 2007-08 2008-09 2009-10

NP-pref. share 23171.02 29021.94 42325.82

No. of eq. share 1359.93 1359.93 1359.93

Earning per share (Rs.) 17.04 21.34 31.12

Interpretation: In general, higher the ratio the better it is and vice-versa.

While interpreting this ratio, it must be seen whether there is any increase in equity shareholder’s fund as a result of retained earning without any change in no. of outstanding shares.

9.DIVIDEND PER SHARE

Meaning:

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This ratio measures relationship between dividend and no. of equity shares.

Objective: The objective of calculating this ratio is to find out net

distributed profit after interest, tax and preference dividend to equity shareholders.

Components: There are two components of this ratio which are as under:1. Dividend paid to equity shareholders2. No. of equity shares

Calculation: This ratio is calculated by dividing dividend paid to equity

shareholders by no. of equity shares. It is expressed as absolute figure. In the form of a formula this ratio can be expressed as under:

(in lacs)

Year 2007-08 2008-09 2009-10

Total dividend declared 17679.07 20398.92 27198.57

No. of share 1359.93 1359.93 1359.9353 | P a g e

Dividend per share (Rs.) 13 15 20

Interpretation: In general higher the ratio the better it is and vice-versa.

10. PRICE EARNING RATIO

Meaning:

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This ratio measures relationship between market value of equity shares & earning per share.

Objective: The objective of computing this ratio is to find out expected

return on investment in equity shares.

Components: There are two components of this ratio which are as under:1. Market price per equity share2. Earnings per share

Calculation: This ratio is calculated by dividing market price per equity

share by earning per share. It is expressed has an absolute this figure. In the form of a formula this ratio may be expressed as under:

(in lacs)

Year 2007-08 2008-09 2009-10

Market price 10 10 10

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Earning per share 17.04 21.34 31.12

Price earning ratio (P/E Ratio) 0.59 0.47 0.32

Interpretation: - It is the most important ratio reflecting the degree through

which earning are capitalize by the stock market seniti mated. Higher the

ratio, better it is show the extent to when market value of the equity share

has increased further it’s helps the management in planning the limit of the

equity capital issue

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11. CURRENT RATIO

Meaning: This ratio establishes a relationship between current assets &

current liabilities.

Objective:

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The objective of computing this ratio is to find the ability of the firm to meet its short term obligation.


1. Current Assets: 9 Current Assets which mean the assets which can be converted in too cash within the period of a year & include the following: Cash balance, Marketable securities, Bills Receivables , Prepaid expenses, advanced payment of tax, Bank balance, Debtors, Stock of all types i.e. raw-materials, work in progress, Finished goods, Incomes due but not received. Important Note: The provision for bad debts or doubtful debts is deducted for the total amount of debtors.

2. Current Liabilities: A current liability which means that liabilities which are expected to be matured within a year and include the following. Creditors, Bills payable, short term loans & advances, Provision for taxation, Bank overdraft, and income received in advances, unclaimed dividend etc.

Calculation: This ratio is calculated by dividing the current assets by current

liabilities. This ratio is usually express as under.

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(in lacs)

Year 2007-08 2008-09 2009-10

Current Assets 40168.55 54210.29 59013.45

Current Liabilities 53420.09 55573.32 55147.30

Current Ratio 0.75 : 1 0.97 : 1 1.07 : 1

Interpretation: -Current ratio of the firm has remained all most constant around as it has kept

constant trend. The company has satisfactory current assets for its future

need. Current assets are more than current liabilities. It means company can

utilized properly current assets. The ideal ratio is 2:1

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Interpretation:

This ratio indicates as of current assets available for each rupee of current liability. Higher the ratio, greater the margin of safety for short term creditors & vise-versa. Traditionally a current ratio of 2:1 is considered to be a satisfactory ratio on the basis of this traditional rule if the current ratio is 2 or more it means the firm is adequately liquid and has the ability to meet its current obligation, if the current ratio is less than 2 it means the firm has difficulty in meeting its current obligation.

12. LIQUID RATIO (QUICK RATIO/ACID

TEST RATIO)

Meaning: This ratio establishes the relationship between quick assets and

liquid liabilities.

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Objective: The objective of calculating this ratio is to find out the ability of

the firm to meet its short term obligations as and when due without relying upon the realization of stock.


1. Quick assets/Liquid assets: Which means those assets which can be converted into cash immediately an include the followingCash balance, Marketable securities, Bills receivable, Bank balance, Debtors, Short term loan and advances or

Quick Assets =Current Assets – Stocks2. Liquid Liabilities which include all current excepted bank over

draft i.e. Liquid Liabilities = Current liabilities – Bank over Draft

Calculation: This ratio is calculated by dividing by the liquid assets by liquid liabilities. This ratio is usually express as a pure ratio.

(in lacs)


Liquid assets 32604.7 45967.96 47958.09

Liquid liabilities 34693.43 39454.14 42665.43

Liquid ratio 0.94:1 1.17:1 1.12:1

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Interpretation:

As per above data we show that in 2008 &2009 there is a access ofLiability than assets so ratio is lower in this year. In 2010 there is a Increase in total liquid asset than ratio is lower @ 1.12:1

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Introduction: This ratio measures the effectiveness with which a firm uses

its available resources. These ratios are also called turnover ratios since they indicate the speed with which the resources are converted in to sales. Usually the following activity ratios are calculated.

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1. Stock Turnover Ratio 2. Working Capital Turnover Ratio 3. Total Assets Turnover Ratio 4. Debtors Ratio 5. Creditors Ratio 6. Book Value per Share Ratio

13. STOCK TURNOVER RATIO

Meaning:

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This ratio measures the overall turnover of stock for a particular

period of time.

Objective:

The objective of calculating this ratio is to find out the

relationship between cost of goods sold and average inventory.

Components:

There are two components of this ratio they are as under:

1. Cost of Goods Sold which is calculated as under

Opening stock

+ Net purchases

+ Direct expenses

– Closing stock

Or

COGS = Net Sales – Gross Profit

2. Average Inventory or Average Stock

Calculation: This ratio is calculated by dividing the cost of goods sold by

average stock. This ratio is usually expressed as number of times. In the formula this ratio may be express as under.

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(in lacs)


Cost of goods sold 63277.65 74130.76 77684.29

Average Stock 3549.275 3884.525 4546.54

Stock turnover ratio (times) 17.83 19.08 17.09

Interpretation:

This ratio indicates the speed with which inventory is converted in to sales. A high ratio indicates efficient performance. In the other hand a too low ratio may be the result of excessive inventory. To judge whether the 66 | P a g e

ratio is satisfactory or not, it should be compared with its own past ratio.

14. Working Capital Turn Over Ratio

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Meaning: This ratio establishes a relationship between net sales & working

capital. Objective:

The objective of computing this ratio is to determine the efficiency in which the working capital is utilized.

Components: There are two components of this ratio which are as

under:1. Net Sales2. Working Capital which means Current Assets – Current Liabilities

Calculation: This ratio is calculated by dividing the net sales by the

working capital. This ratio is usually expressed as no. of times. In the form of a formula this ratio may be expressed as under.

(in lacs)

Year 2007-08 2008-09 2008-10

Net sales 147337.90 169481.35 196245.92

Working capital 13251.54 1363.03 3866.15

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WCT 11.12 124.34 50.75

Interpretation: This ratio indicates the firm’s ability to generate sales per

rupee of working capital. In general, higher the ratio, the more efficient the management & utilization of working capital and vice-versa. In the year 2008Firm’s WC is @ lover level. The level was increase in 2009 @ a pick to 124Reached down in 2010 @50

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15. Total Asset Turnover Ratio

Meaning: This ratio measures the overall performance or activity of the

business enterprise.

Objective: The objective of calculating this ratio is to find out the efficiency

or inefficiency in the use of total assets.

Components: There are two components of this ratio which1. Net Sales 2. Total Assets

Calculation:This ratio is calculated by dividing net sales by total assets.

(in lacs)Year 2007-08 2008-09 2009-10

SALES 147337.30 169481.35 196245.92

Total assets 16689.37 22098.32 33069.91

Total assets turnover

ratio 8.83 7.67 5.93

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Interpretation: An ideal total assets turnover ratio is 2:1 i.e. Amount of

sales are double than total assets. A lower ratio than the ideal ratio shows that the assets are not utilized properly. Here in the firm’s asset turn overRatio is decreasing per year. In 2007 its a8.83 than decrease in current yearIs 5.93i.e. 2%

16. Debtors Ratio71 | P a g e

Meaning: This ratio establishes a relationship between debtors and bills

receivables with average daily credit sales.

Objective: The objectives of computing this ratio is to find out the

efficiency which the trade debtors are managed.

Components: There are two components of this ratio. They are as under1. Debtors and Bills receivable2. Net Credit Sales

Calculation: This ratio is calculated by dividing debtors and bills

receivables by net credit sales. This ratio is usually expressed as no. of days.

(in lacs)

Year 2007-08 2008-09 2009-10

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Debtors + B\R 918.55 1113.45 976.88

Credit sales 147337.90 169481.35 196245.92

Debtors ratio 2.28days 2.40 days 1.87days

Interpretation: This ratio shows average collection period for credit sales.

In other words it can be said that the time period given to debtors to pay their payments can be known by this ratio. This ratio is also known as Debtor’s velocity.

17. Book Value Per ShareMeaning:

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This ratio establishes relationship between equity share capital &

reserves and surplus with no. of shares.

Objective:

The objective of computing this ratio is to find out the proportion of

share capital & reserves & surplus with no. of equity shares.

Components:

There are two components of this ratio

1. Equity share capital & reserves and surplus

2. No. of equity shares

Calculation:

This ratio is computed by dividing equity share capital & reserves &

surplus by no. of equity shares. It is expressed as an absolute figure.

Book Value per Share Ratio =

(in lacs)

Year 2007-08 2008-09 2009-10

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Eq. shares 1359.93 95.92 95.92

Reserves & surplus 14860.69 832.58 998.55

No. of eq shares 1359.93 95.92 95.92

Book value per share 11.93 9.68:1 11.4:1

Interpretation:

In general higher the ratio better it is because this ratio measures relationship between share capital and reserves & surplus with no. of equity shares. In the most of the companies the amount of equity share capital remains constant & the value of reserves & surplus charges. Whenever company has high amount of profits, the value of reserves & surplus will increase. Therefore higher book value per share means high amount of profitability. The book value per share is tend to increasing tend of the firm

18. CREDITORS RATIO

Meaning:This ratio establishes a relationship between creditors and bills

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payable and average daily credit purchases.

Objective:The objective of computing this ratio is to determine the efficiency

with which creditors are managed.

Components:There are two components of this ratio1. Creditors and Bills Payable2. Net Credit Purchases

Calculation:This ratio is calculated by dividing the creditors and Bills Payables by

Net credit purchases. This ratio is usually expressed as X no. of times (days).Formula: -

Creditors ratio = Creditors + bills payable

Credit purchase

(in lacs)


Creditors 267.33 375.73 375.5

Average daily purchase 1374.94 1593.65 2119.93

Creditors ratio (days) 71 86 62

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Interpretation: - This ratio of the firm has decreased in 2 years from 71 in 2006-07

to 62 in 2008-09. It shows the bad position of the company and company

cannot collect debt easily which can be a loss to the firm.

This ratio shows an average time period for which the credit purchase remain outstanding or the average credit period allowed by the creditors. This ratio is also known as Debt Payment period or Creditors Velocity

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19. Capital Structure Ratio (Capital Gearing Ratio ) 78 | P a g e

Meaning:Capital structure of a company consist of a verity of securities

Ex. Equity share & preference share which satisfy its share capital requirements while by other securities such as debentures, warrants etc. the company satisfies its access requirement of long term capital & borrowed capital, leverage ratios are calculated. Sum of the leverage ratios are as under.

1. Debt equity ratio2. Proprietary ratio3. Capital Gearing ratio4. Long term funds to fixed assets ratio

20. Debt Equity RatioMeaning:79 | P a g e

This ratio establishes a relationship between long term debts & shareholders’ funds.

Objective:The objective of computing this ratio is to find out the relative

proportion of debt & equity in financing the assets of a firm.

Components:There are two components of this ratio which are as under:1. Long term debt which means all types of secured and unsecured

loans.Ex. Debtors, Loans from financial institution

2. Shareholder’s funds which means equity share capital + Preference share capital + Reserves & surplus – Fictitious Assets

Calculation:This ratio is calculated by dividing the long term debts of the firm by

shareholder’s fund. This ratio is usually expressed as a pure ratio.Ex. 2:1

Debt Equity Ratio =

Calculation: (in lacs)

Year 2007-08 2008-09 2009-10

Long term debt 468.75 468.75 468.75

Share holders fund 16220.65 21629.57 32611.16

Debt eq ratio .029:1 .022:1 .014:1

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Interpretation: This ratio indicates the margin of safety to long term creditors. Lower ratio means a larger safety margin for creditors & vice-versa. Here in the firm this ratio indicates towards lower level which shows firm had larger safety for creditors. It is better condition for firm

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21. PROPRIETOR’S RATIO

Meaning: This ratio measures the relationship between shareholder’s funds &

total assets of the company.

Objective:The objective of calculating this ratio is to find out how efficiency the

properties have utilized the funds for purchasing the assets.

Components:There are two components of this ratio which are as under:

1. Shareholder’s funds or proprietor’s fund2. Total assets or total liabilities

Calculation:This ratio is computed by dividing shareholder’s fund by total assets.

In the form of a formula their ratio may be expressed as under:

Formula: -

Proprietor’s ratio = Shareholder’s fund * 100 Total asset/liability

(in lacs)


Proprietary fund 16220.62 21629.57 32611.16

Net assets 16689.37 22098.32 33669.91

Proprietary ratio 97.19% 97.88% 98.61%

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Interpretation: - Proprietary ratio shows 2007-08 an upward move and after in year

2008-09 also towards a top. Ratio was @ pick [email protected]%. Then firm

has a strong owner’s fund than the assets of the firm

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22. LONG TERM FUND TO FIXED ASSET RATIO

Meaning: This ratio measures a relationship between long term funds to fixed

assets.

Objective:With the help of this ratio one can move how efficiently the long term

funds have been invested in fixed assets.

Components:There are two components of this ratio which are as under:1. Shareholder’s funds + Long term debts2. Fixed assets

Calculation:This ratio is calculated by dividing shareholder’s funds & long term

debts by fixed assets. It is expressed as pure ratio.

Formula:

Long Term Funds to Fixed Assets Ratio = Here, Shareholder’s Funds = Preference share + Reserves & Surplus + Equity Share Capital + Profit and Loss A/c credit balance – Fictitious Assets

And Long Term Debts = Debenture and Long Term Loan

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(in lacs)Calculation: -Year 2007-08 2008-09 2008-09

Long term funds 1828.68 1828.68 1828.68

Fixed assets 19899.42 17859.64 25313.66

Long term funds to fixed ratio 0.09:1 0.10:1 0.07:1

Interpretation: -

Long-term ratio decreased from 2.84 to 1.91. It has shown fall in the

ratio. The fixed assets should always be acquired out of long-term funds,

meaning thereby that this ratio should not be less than 100. The company

has not achieved a good ratio as it shows a downward trend.

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PROFIT&LOSS ACOOUNT FOR THE YEAR ENDED

31st MARCH, 2007-2008 (in lacs)

PARTICULARS 2007-08INCOME Gross sales 155321.10 Less: Excise duty 7983.20 Net sales 147337.90 Other income 8478.12EXPENDITURE Cost of Goods sold 63277.65 Employee Costs 11827.68 Other Expenses 49521.29 Depreciation/Amortization/Impairment 1984.49PROFIT FOR THEYEAR BEFORE TAX Provision for taxation Current 5824.66 Deferred 215.77 Fringe benefit 425.00PROFIT AFTER TAXBalance of profit brought forward 2486.96Balance available for appropriationAPPROPRIATION First Interim Dividend 8159.57 Second Interim Dividend - Special Dividend - Proposed - Final Dividend – Proposed 9519.50 Dividend Tax 5084.64 Transfer to General Reserve 2317.10BALANCE CARRIED TO BALANCE SHEET 577.17

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PARTICULARS 2008-09INCOME Gross sales 175815.90 Less: Excise duty 6334..55 Net sales 169481.35 Other income 10775.72EXPENDITURE Cost of Goods sold 74130.76 Employee Costs 14340.65 Other Expenses 54960.12 Depreciation/Amortization/Impairment 2294.89PROFIT FOR THEYEAR BEFORE TAX Provision for taxation Current 4107.50 Deferred 1031.21 Fringe benefit 370.00PROFIT AFTER TAXBalance of profit brought forward 577.17Balance available for appropriationAPPROPRIATION First Interim Dividend 12239.35 Second Interim Dividend 8159.57 Final Dividend – Proposed 9519.50 Dividend Tax 3414.02 Transfer to General Reserve 2902.19BALANCE CARRIED TO BALANCE SHEET 2883.98

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PARTICULARS 2009-10INCOME Gross sales 202464.65 Less: Excise duty 6218.73 Net sales 196245.92 Other income 9845.72EXPENDITURE Cost of Goods sold 77684.29 Employee Costs 15907.35 Other Expenses 60263.36 Depreciation/Amortization/Impairment 3756.79PROFIT FOR THEYEAR BEFORE TAX 157611.79 Provision for taxation Current 6430.80 Deferred 276.77 Fringe benefit -PROFIT AFTER TAXBalance of profit brought forward 2883.98Balance available for appropriationAPPROPRIATION First Interim Dividend 10879.43 Second Interim Dividend 9519.50 Final Dividend – Proposed 6799.64 Dividend Tax 4583.67 Transfer to General Reserve 4232.58BALANCE CARRIED TO BALANCE SHEET 9194.98

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BALANCE SHEET AS AT 31ST MARCH, 2007-08 (in lacs)

SOURCES OF FUNDS 2007-08 TOTALSHAREHOLDERS’ FUNDSShare capital 1359.93Reserve and surplus 14860.69 16220.62LOAN FUNDSUnsecured loans 468.75Total 16689.37

APPLICATION OF FUNDS FIXED ASSETS Gross block 44959.43Less : depreciation 25818.85Net block 19140.58Capital work in progress and Advances for Capital Expenditure

758.84 19899.42

INVESTMENTS 7258.77CURRENT ASSETS, AND LOANS AND ADVANCES Inventories 7563.85 sundry debtors 918.55 Cash and bank balances 14426.28 Interest Accrued on Investments 264.20 Loans and advances 16995.67LESS :CURRENT LIABILITY AND PROVISIONS Current liability 34693.43Provisions 18726.66NET CURRENT ASSETS 13251.54TOTAL 16689.37

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BALANCE SHEET AS AT 31ST MARCH, 2008-2009 (in lacs) SOURCES OF FUNDS 2008-09 TOTALSHAREHOLDERS’ FUNDSShare capital 1359.93Reserve and surplus 20269.64 21629.57LOAN FUNDSUnsecured loans 468.75Total 22098.32

APPLICATION OF FUNDS FIXED ASSETS Gross block 42525.56Less : depreciation 25132.76Net block 17392.80Capital work in progress and Advances for Capital Expenditure

466.84 17859.64

INVESTMENTS 3832.89CURRENT ASSETS, AND LOANS AND ADVANCES Inventories 8242.33 sundry debtors 1113.45 Cash and bank balances 25114.33 Interest Accrued on Investments 718.76 Loans and advances 10021.42LESS :CURRENT LIABILITY AND PROVISIONS Current liability 39454.14Provisions 16119.18NET CURRENT ASSETS 1363.03TOTAL 22098.32

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BALANCE SHEET AS AT 31ST MARCH, 2009-2010 (in lacs)

SOURCES OF FUNDS 2009-10 TOTALSHAREHOLDERS’ FUNDSShare capital 1359.93Reserve and surplus 31251.23 32611.16LOAN FUNDSUnsecured loans 458.75Total 33069.91

APPLICATION OF FUNDS FIXED ASSETS Gross block 53452.15Less : depreciation 28757.37Net block 24694.78Capital work in progress and Advances for Capital Expenditure 618.88 25313.66 INVESTMENTS 2100.07CURRENT ASSETS, AND LOANS AND ADVANCES Inventories 1105536 sundry debtors 976.88 Cash and bank balances 34758.44 Interest Accrued on Investments 548.34 Loans and advances 11674.43LESS :CURRENT LIABILITY AND PROVISIONS Current liability 4265.43Provisions 12481.87NET CURRENT ASSETS 3866.15TOTAL 33069.91

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COMMON SIZE STATEMENT OFPROFIT AND LOSS ACCOUNT

(Rs. lacs) 2007-08 2008-09 2009-10

Particular Rs. % Rs. % %Income:

Gross sale155321.10 105.41

175815.90 103.73

202464.65 103.17

Less: Excise duty 7983.20 5.41 6334.55 3.73 6218.73 3.16

Net sales147337.90 100

169481.35 100

196245.92 100

Other income 8478.12 5.75 10775.72 6.35 9845.72 5.01

Total 155816.02 105.75

180257.07 106.35

206091.64 105.01

Expenditure:COGS. 63277.65 42.94 74130.76 43.73 77684.29 39.58

Employee costs 11827.68 8.02 14340.65 8.46 15907.35 8.10

Other expenses 49521.29 33.61 54960.12 32.42 60263.36 30.71

Depreciation 1984.49 1.34 2294.89 1.35 3756.79 1.91

Total 126611.11 85.93

145726.42 85.98

157611.79 80.31

Provision for taxation

Current tax 5824.66 3.95 4107.50 2.42 6430.80 3.27

Deferred tax (215.77) 0.14 1031.21 0.60 (276.77) 0.14

Fringe benefit tax 425.00 0.28 370.00 0.21 - -Profit after taxation

Add: Balance brought forward 2486.96 1.68 577.17 0.34 2883.98 1.46Profit available for appropriation

APPROPRIATI

First Interim 8159.57 5.53 12239.35 7.22 10879.43 5.54

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dividend Second Interim dividend - 8159.57 4.81 9519.50 4.85 final proposed dividend 9519.50 6.46 - - 6799.64 3.46

Tax on dividend 5084.64 3.45 3414.02 2.01 4583.67 2.33

Transfer to general reserve 2317.10 1.57 2902.19 1.71 4232.58 2.15Balance caring forward

577.17 0.37 2883.98 1.70 9194.98 4.68

Interpretation of the Profit & Loss account as Common size statement

The net sale is assumed to be 100%. All individual items of expenses and incomes are shown as percentage of sales.

The net sale of the current year 08-09 is 169481.35. So we can assume 100%. And calculates the percentage.

Then after we can calculate the other income and we can see that the percentage of the other incomes are 5.75 (8478.15), 6.35 (10775.72), and 5.01 (9845.72).

We can see that the percentage of the other incomes is not good in the current year in compare to others in compare the last 2 years.

Common Size statements are found to be very useful for comparison of last three years.

COMMON SIZE STATEMENT OF

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BALANCESHEET

(Rs. In Lacs) 2007-08 2008-09 2009-10

Particular Rs. % Rs. % Rs. %SOURCES OF FUNDS[A] Shareholder’s fund Share Capital Reserves & Surplus

[B] Loan fund Unsecured

APPLICATION OF FUND

[A] Fixed assets Gross blockLess: Depreciation Net block Capital work in progress and advances for Capital expenditure

[B] Investments[C]Deferred tax assets

1359.9314860.69

8.1489.04

1359.9320269.64

6.1591.72

1359.9331251.23

4.1194.50

468.75 2.80 468.75 2.12 458.75 1.38

44959.4325818.8519140.58

758.84

269.38154.70114.68

4.54

42525.5625132.7617392.80

466.84

192.43113.7378.70

2.11

53452.1528757.3724694.78

618.88

161.6386.9574.67

1.87

7258.772782.72

43.4916.67

17859.643832.89

80.8117.34

2100.071790.03

6.355.41

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[C] Current assets , Loan And advances

Inventories Sundry Debtors Cash & bank balance Interest accrued on investment. Loan& advances

7563.85918.5514426..28

264.2016995.67

45.325.5086.43

1.58101.83

8242.331113.4525114.33

718.7610021.42

37.295.03113.64

3.2586.07

11055.36976.8834758.44

548.3411674.43

33.432.95105.10

1.6535.30

Less: Current liability and provisions Current Liabilities Provisions

[D]Net current assets

TOTAL

34693.4318726.66

207.87112.20

39454.1416119.18

178.5372.94

42665.4312481.87

129.0137.74

13251.54 79.40 1363.03 0.06 3866.15 11..69

16689.37 100 22098.32 100 33069.91 100

s

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CASHFLOW STATEMENT:

Particulars 2008-09(Rs. Lacs)

2007-08(Rs. Lacs)

2006-07(rs.lacs)

Cash flow from Operating Activities:Net Profit before tax

34530.65 29204.91 20160.59

Adjustment for:Unrealized Foreign exchange Loss (Net)

875.44 23.19 22.07

Depreciation 2294.89 1984.49 1525.59Reversal of diminution in value of invt.

- (750.00)

Interest expenses 110.01 143.51 98.04Profit on sale of fixed assets

(980.54) (83.70) (847.43)

Interest income (3136.57) (2144.87) (1680.75Dividend from subsidiaries

(397.56) - 196.56

Gain on maturity of Investments

(39.13) -

Operating profit before working capital changes

33257.19 28377.53 19081.75

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Adjustment for increase/decrease in Working capitalInventories (420.74) 468.78 596.91Sundry Debtors (194.90) 14.08 285.06Loans and Advances

933.82 473.23 1645.16

Current liabilities and provisions

3186.50 3146.23 5007.29

Cash generated from operations

36761.87 32479.85 21561.94

Direct taxes paid (4823.45) (4339.56) 6138.12Net cash from operating activities (A)

31938.42 28140.29 15423.82

Cash flow from Investing activities:Purchase of fixed assets

(243.50) (2716.88) (3844.92)

Sale of fixed assets

1107.27 119.45 875.34

Sale of investments in subsidiaries (Net)

(165.28) - -

Sale of other invt. 3071.48 5868.51 1500.00Capital Repatriation by Wholly-Owned subsidiary

- 956.25 -

Inter corporate 290.00 (3885.00) 110.0097 | P a g e

depositsLoans to subsidiaries

(3335.00) -

Interest received 2682.08 2266.99 1718.47Dividend from subsidiaries

775.61 - 196.56

Net cash from Investing activities (B)

4182.66 2609.32 555.45

Cash flow from Financing activities:Long term loans paid

- 41.25 8.02

Interest paid (110.01) (143.51) 98.04Dividend paid (21746.08) (11333.41) 12067.56Repayment of capital

- (12130.53) -

Dividend Tax paid

(3657.04) (3929.04) 1430.47

Net cash from financing activities (C)

(25513.13) (27495.24) 13604.09

Net increase in cash and cash equivalents (A+B+C)

10607.95 3254.37 2375.18

5Cash and cash equivalents in the beginning of the year

14426.28 11171.91 8796.73

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Cash and cash equivalents taken over as per the scheme of Amalgamation

80.10 - -

Cash and cash equivalents at the end of the year

25114.33 14426.28 11171.91

Cash and cash equivalents compromise:Balances with scheduled banks inCurrent a/c 3743.77 3571.57 5012.01Deposits a/c 20745.23 10259.65 5110.86Unpaid dividend a/c

625.33 595.06 1049.04

Cash and cash equivalents as at the end of the year

25114.33 14426.28 11171.91

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Conclusion

The analysis of annual report of the last three of the company reveals the company is improving working efficiency taking step of increasing its turnover. The analysis reveals that the total income of the company is increasing and its expenses are decrease. Hence it can be concluded that the company is performing very efficiently, it has highly qualified managerial personnel. The analysis also reveals that the company utilizes its raised sources very efficiently to earn profit and achieve its objectives. Company repays there loan regularly which is good sign for the future. Ratios show satisfactory situation so it indicate the company’s ability to increase its profit, performance and financial position is very sound. Overall it can be concluded that company is performing very efficiently and therefore it has future prospects in India and international market.

COLGATE – PALMOLIVE LTD. analysis, I can say, it is financially sound and well managed. The company is trying to improve its efficiency more and more. We hope that the company reaches at the top by making strong efforts. It was tough job to make this repot but last able to complete the project.

I myself could put into use my theoretical knowledge. They helping to build my confidence. I am thankful to all who helped me in the project report.

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BIBLIOGRAPHY

REPORTS

-Annual Report 2007-2008 of GOLGATE-PALMOLIVE LTD. Annual Report 2008-2009 of GOLGATE-PALMOLIVE LTD.Annual Report 2009-2010 of GOLGATE-PALMOLIVELTD.

BOOKS:

-B.S.Shah “Principles of financial Management” 4th edition Ahmedabad,

-B.S.Shah Prakashan. 2008-09.

WEBSITES:

www.Colgate-palmolive.ltd.com

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http://www.Colgate-palmolive.ltd.com/

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Documents

COLGATE