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    Comparison of

    Godrej Consumer Products Ltd. & Hindustan Unilever Ltd.

    on the basis of their Financials.

    A Research Project Report ubmitted to

    Amit! Global "usiness chool# Amit! Universit!

    for the partial fulfillment of a$ard of de%ree of

    "ACHL'R 'F "U() A*+()(,RA,(')

    ubmitted b!- ar/uan ali

    ""A i0th emester

    nrollment )umber- A12345321467

    "atch- 642186425

    Guided b!- Rohit 9umar

    AG"# Patna

    Amit! Global "usiness chool# Patna

    Amit! Universit!

    6425

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    ,' :H'+ (, +A; C')CR)

    This is to certify that the research work entitled "achelor of 

    "usiness Administration?  at Amit! Global "usiness chool# Patna  represents

    my original work and no part of this thesis has been submitted for any other degree

    or diploma.

    The assistance and help received during the course of this investigation and

    sources of Literature have been duly acknowledged.

    Signature of the Candidate

    ubham onu

    ""A i0th emester

    A12345326467

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    CR,(F(CA,

    This is to certify that the research report entitled "achelor of 

    "usiness Administration? is a record of bonafide research carried out by him/her.

    ubham onu 

    has worked under my guidance and supervision for submission of 

    this thesis, which in my opinion is of requisite standard.

    This research work or any part thereof has not been submitted to any other 

    niversity or !nstitute for the award of any other degree or diploma.

    i%nature of the Guide

    Rohit 9umar

    Amit! Global "usiness chool

    Amit! Universit!

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    AC9)':L*G+),

    This research report in its present form is a result of a cohesive team spirit. !t bears

    the imprints of many people who coagulated to guide and support me. "ny fruitful

    work is incomplete without a word of thanks to those involved directly or 

    indirectly in its completion. #ith my sincere gratitude ! would like to thank 

    everyone who has supported me in this research pro$ect.

    "t the outset, ! am indebted to th! God Almi%ht! who empowered me with the

    ability to complete this stupendous task.

    ! e%press my heartiest gratitude to my &uide respected Rohit 9umar# "mity&lobal 'usiness School, "mity niversity, who spared his precious time and gave

    valuable suggestions, which were essential for completion of this research. (is

    guidance kept me striving to work harder in right direction and did not allow me to

    deter from set goals. ! am particularly appreciative of his fine efforts in

    meticulously ) pain staking going through my research report with a *+ine tooth

    Comp.

    ! would like to e%press my heartfelt appreciation ) gratitude to -r. ivekanand

    andey, -ean, "mity &lobal 'usiness School, atna who kindly e%tended his

    support in the completion of the work.

    ! would like to e%press my heartfelt appreciation and gratitude to all faculty

    members of "mity &lobal 'usiness School, atna, who encouraged me and gave

    their invaluable direction throughout the research work.

    +urther, ! owe a great deal to all my teachers who supported me at every step.

    " special acknowledgment goes to my parents# sister and brother, who saw me

    through all the $oys and frustration of this research, while helping me stay focused

    on the present. Thank you, for always believing in me and reminding me that the $ourney to a goal is one step at a time.

    ! would also like to place on record my sense of gratitude to friends for their 

    support and encouragement which has always guided me through my entire work.

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    +inally, ! am thankful to all who helped me directly or indirectly in completion of 

    this report.

    i%nature of the tudent

    ubham onu

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    PRFAC

    (ntroductor! Para%raph

    The purpose of this research is to do *Comparison of &odre$ Consumer roducts

    Ltd. ) (industan nilever Ltd. on the basis of their financials. The reason for 

    selecting &odre$ Consumer roducts Ltd. and (industan nilever Ltd. is because

     both belongs to the +ast 0oving Consumer &oods 1+0C&2 industry and they are

    the top performers as well as competitors of each other. !n this report, the financial

    statements 1'alance sheet ) rofit ) loss account2 of both companies of last three

    year 1345363457, 345763458, and 3458634592 are used to compare which

    company is performing better and providing a good rate of return to their investors

    or shareholders. To do this comparison :atio analysis, Comparative statement, andCommon si;e statement are used. resent study has been planned in si% chapters.

    Chapter 2- (ntroduction

    This chapter includes the sub chapters as following, about the topic, about the

    companies, importance of this report to different parties, ob$ectives and limitations

    of this report.

    Chapter 6- Literature Revie$

    !n this chapter what other researcher or author has given their conclusions are

    given.

    Chapter 1- Research +ethodolo%!

    " research design is a plan of action to be carried out in connection with research

     pro$ect. !t is the conceptual structure within which research is conducted and it

    constitutes the blue print for the collection and analysis of data.

    -escriptive :esearch design is appropriate for this study. -escriptive study is usedto study the situation. This study helps to describe the situation. " detail descriptive

    about present and past situation can be found out by the descriptive study. !n this

    involves the analysis of the situation using the secondary data.

    The nature of data which is collected and used for this research is secondary in

    nature.

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    Chapter 3- *ata Anal!sis and Findin%s

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    ContentsChapter 5= !?T:

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    Comparative statement=............................................................................................. 27

    Chapter 8= -"T" "?"LBS!S ) +!?-!?&S.........................................................................29

    '"L"?CA S(AAT

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    Chapter 2- (),R'*UC,(')

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    About the topic-

    The purpose of this research is to do

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    About the compan!-

    Godrej Consumer Products Limited-  &odre$ Consumer roducts Limited 1&CL2 is an

    !ndian consumer goods company based in 0umbai, !ndia. &CLs products include soap, hair 

    colorants, toiletries and liquid detergents. !ts brands include Cinthol, &odre$ +air &low, &odre$

     ?o.5 and &odre$ Shikakai in soaps, &odre$ owder (air -ye, :enew, ColourSoft in hair 

    colorants and A;ee liquid detergent. &CL currently operates several manufacturing facilities in

    !ndia spread over seven locations and grouped into 8

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    ales & distribution net$orB-

      &CL has a widespread distribution network across !ndia. !t makes sales in both

    urban and rural markets, enabling it to benefit from the opportunities in both segments. !t has a

    sales team of over 394 staff spread across the country. !t has a network of 77 C)+ agents and as

    on 3H +ebruary 344I. !t had 5,38J distributors, 583 super stockiest and 7,5J9 sub stockiest to

    support the sales team in !ndia. !ts distributors and sub stockiest cover around K94,444 retailers

    in !ndia. &CL has linked its ma$or distributors in !ndia through a system called Sampark, a

    collaborative planning, forecasting and replenishment system with its A: system leading to

    reduced inventory levels.

    Research and development-

    &CLs :)- departments focus on developing new products, standardi;ing new analytical

    methodsclarification neededM and finding cheaper and more abundant alternatives to key raw

    materials. Through this research and development center, &CL continuously interact withconsumers to obtain feedback on its products and information obtained is leveraged to

    complement new product development activities.

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    Products-

     

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    http://www.godrejcp.com/brands/hair-care/asia/godrej-renew-india.aspxhttp://www.godrejcp.com/brands/personal-care/africa/tura.aspxhttp://www.godrejcp.com/brands/home-care/africa/good-knight-nigeria.aspxhttp://www.godrejcp.com/brands/personal-care/latin-america/villeneuve-2.aspxhttp://www.godrejcp.com/brands/hair-care/latin-america/roby-2.aspxhttp://www.godrejcp.com/brands/hair-care/africa/renew-africa.aspxhttp://www.godrejcp.com/brands/hair-care/latin-america/919-2.aspxhttp://www.godrejcp.com/brands/hair-care/europe/touch-of-silver.aspxhttp://www.godrejcp.com/brands/personal-care/latin-america/pamela-grant.aspxhttp://www.godrejcp.com/brands/home-care/asia/stella-2.aspxhttp://www.godrejcp.com/brands/hair-care/africa/inecto-3.aspxhttp://www.godrejcp.com/brands/home-care/asia/ezee.aspxhttp://www.godrejcp.com/brands/personal-care/asia/mitu-3.aspxhttp://www.godrejcp.com/brands/hair-care/asia/nupur-2.aspxhttp://www.godrejcp.com/brands/personal-care/europe/cuticura.aspxhttp://www.godrejcp.com/brands/hair-care/latin-america/ilicit.aspxhttp://www.godrejcp.com/brands/personal-care/europe/soft-gentle.aspx

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    Hindustan Unilever Limited-

    (industan nilever Limited 1(L2 is an !ndian consumer goods company based in 0umbai,

    0aharashtra. !t is owned by "nglo6-utch Company nilever which owns a KJN controlling

    share in (L as of 0arch 3459 and is the holding company of (L. (Ls products includefoods, beverages, cleaning agents, personal care products and water purifiers.

    (L was established in 5H77 as Lever 'rothers and, in 5H9K, became known as (industan Lever 

    Limited, as a result of a merger between Lever 'rothers, (industan anaspati 0fg. Co. Ltd. and

    nited Traders Ltd. !t is headquartered in 0umbai, !ndia and employs over 5K,444 workers,

    whilst also indirectly helping to facilitate the employment of over K9,444 people. The company

    was renamed in @une 344J as E(industan nilever LimitedE.

    (industan nilevers distribution covers over 3 million retail outlets across !ndia directly and its

     products are available in over K.8 million outlets in the country. "s per ?ielsen market research

    data, two out of three !ndians use (L products.

    "usiness cate%ories-

    #ith over 79 brands spanning 34 distinct categories such as soaps, detergents, shampoos, skin

    care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water 

     purifiers, the Company is a part of the everyday life of millions of consumers across !ndia. !ts

     portfolio includes leading household brands such as Lu%, Lifebuoy, Surf A%cel, :in, #heel, +air 

    ) Lovely, ond>s, aseline, LakmO, -ove, Clinic lus, Sunsilk, epsodent, Close up, "%e,

    'rooke 'ond, 'ru, Dnorr, Dissan, Dwality #all>s and ure it.

    Competition-

    • !n the soaps category, (L brands compete with &odre$ Consumer roducts Limited )

     ?irma.

    • onds6 (industan nilever Limited brands compete with &CLs talcum powder brands

    and -enim.

    • !n the liquid detergent category, Surf A%cel6 (industan nilever Limited compete with

    Safe wash6 #ipro and &CL brands A;ee and &enteel.

    *irect ellin% *ivision-

    (L also runs (industan nilever ?etwork 1(L?2, a direct selling business arm. nder 

    (L?, health products are marketed by "yush Therapy in collaboration with "rya aidya

    harmacy, CoimbatoreP beauty products by "vianceP home products by Lever (omeP and male

    grooming by -.!.B. There are also premium products for beauty salons and others.

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    Products-

    #e make some of the best6loved brands in the world like 'ru, -ove, Dwality #alls, ure it and

    Surf A%cel to name $ust a few. #ere one of the biggest +0C& Company in the world.

    https://www.hul.co.in/brands/

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    (mportance of this research-

    ,o compan!-

    !t helps in understanding that company=

    5. !s profitable or not.

    3. (as enough money to pay its bills and debts

    7. !s using its asset efficiently or not.

    8. "ble to convert its asset into cash efficiently or not.

    9. !t helps in locating weakness of the company>s operations even though its overall

     performance is good.

    K. 'y analy;ing the past performance company is able to establish future trends of its

    financial performance which will help in formulating the company>s future plan.

    J. To compare with their competitors.

    ,o investors-

    They are most concerned about the firm>s earnings. They restore more confidence in those firms

    that show steady growth in earnings. They concentrate on the analysis of the firm>s present and

    future profitability. They are also interested in the firm>s financial structure to e%tent it influences

    the firm>s earnings ability and risk. !t helps investors in=

    5. Taking decision where to invest.

    3. nderstanding the business is profitable or not.

    7. Comparing the companies in same industry.

    Creditors-

    They are interested in a firm>s ability to meet their claims over a very short period of time. Their 

    analysis will, therefore, confine to the evaluation of the firm>s liquidity position.

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    uppliers of lon% term debt-

    They are concerned with the firm>s long term solvency and survival. They analy;e the firm>s

     profitability over time, its ability to generate cash to be able to pay interest and repay principal,

    and the relationship between various sources of funds.

    +ana%ement-

    They are interested in every aspect of the financial analysis. !t is their overall responsibility to

    see that the resources of the firm are used most effectively and efficiently, and that the firm>s

    financial condition is sound.

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    '"C,(D-

    The ma$or ob$ectives of the recent study are to know about financial strengths and weakness of 

    &CL ) (L through financial ratio analysis, common si;e statement, and comparative

    statement.

    To evaluate the performance of the company by using ratios as a yardstick to measure the

    efficiency of the company. To compare the liquidity, profitability, efficiency and solvency

     position of the company during the study period. To analy;e and evaluates various facts of the

    financial performance of the company. To make the comparisons between the ratios of &CL )

    (L.

    1) To study the present financial performance of &CL ) (L.

    2) To determine the profitability, liquidity, activity, solvency, and valuation ratios )

    common si;e and comparative statement.

    3) To offer appropriate suggestions for the better performance of the organi;ations.

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    +ethodolo%!-

    The information is collected through secondary sources during the pro$ect. That information was

    utili;ed for calculating performance evaluation and based on that interpretations were made.

    ources of secondar! data-

      Collection of the data is essential part of research. The nature of data

    which is collected and used for this research is secondary in nature. The relevant and required

    data has been collected from selected companies websites 1www.godre$cp.com, www.hul.co.in2,

    annual reports of &CL ) (L, books 1+inancial 0anagement, ! 0 andey2, and through

    various search engines.

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    Limitations-

    52 !t is difficult to decide on the proper basis of comparison.32 The comparison is rendered difficult because of differences in situations of two

    companies or of one company over the years.

    72 The price level changes make the interpretation of ratios invalid.

    82 Standards for comparison

    92 Company differences

    K2 -ifferent definitions of variables

    J2 Changing situations

    I2 (istorical data

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    Chapter 6- L(,RA,UR RD(:

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    Literature revie$-

    • ( + PA)*; in his book, Financial +ana%ement on page no. 7E2, has given different

     purpose of financial analysis for different persons connected with the company.

    Creditors- They are interested in a firm>s ability to meet their claims over a very short

     period of time. Their analysis will, therefore, confine to the evaluation of the firm>s

    liquidity position.

    uppliers of lon% term debt- They are concerned with the firm>s long term solvency and

    survival. They analy;e the firm>s profitability over time, its ability to generate cash to be

    able to pay interest and repay principal, and the relationship between various sources of 

    funds.

    (nvestors- They are most concerned about the firm>s earnings. They restore more

    confidence in those firms that show steady growth in earnings. They concentrate on the

    analysis of the firm>s present and future profitability. They are also interested in the firm>s

    financial structure to e%tent it influences the firm>s earnings ability and risk 

    +ana%ement- They are interested in every aspect of the financial analysis. !t is their 

    overall responsibility to see that the resources of the firm are used most effectively and

    efficiently, and that the firm>s financial condition is sound.

    • Dennedy and 0uller 15HHH2 in his research article on financial performance he has

     pointed that the analysis and !nferences/interpretation of financial Statements are an

    attempt to determine the significance and meaning of financial statements data So that the

    forecast may be made of the prospects for future earnings, ability to pay interest and -ebt

    maturates 1both current and long term2 and profitability and sound dividend policy.

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    • @onas Almerra$i 134492 in his research article on financial performance he has pointed

    that he tries to say that ratios can be an invaluable tool for making an !nvestment

    decision. Aven so, many new investors would rather leave their decisions to fate than try

    to deal with the intimidation of financial ratios. The truth is that ratios arent that

    intimidating, Aven if you dont have a degree in business or finance. sing ratios to make

    informed decisions about an investment makes a lot of sense, once you know how use

    them.

    • !.0.andey 1344J2 in his research article on financial performance he has pointed that the

    financial statements contain information about the financial consequences and sourcesand uses of financial resources, one should be able to say whether the financial condition

    of a firm is good or badP whether it is improving or deteriorating. s financial condition.

    • Susan #ard 1344I2 in his research article on financial performance he has pointed that

    emphasis that financial analysis using ratios between key values help !nvestors cope with

    the massive amount of numbers in company financial statements. +or A%ample, they can

    compute the percentage of net profit a company is generating on the funds it has

    deployed. "ll other things remaining the same, a company that earns a higher percentage

    of rofit compared to other companies is a better investment option.

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    • :achchh 0ina%i " 134552, in his research article on financial performance he has pointed

    ) suggested that the financial statement analysis involves analy;ing the financial

    statements to e%tract information that can facilitate decision making. !t is the process of 

    evaluating the relationship between component parts of the financial statements to obtain

    a better understanding of an entity>s position and performance.

    • riyaaks 10ar 34532, in his research article on financial performance he has pointed that

    +inancial statement analysis is the process of e%amining relationships among financial

    statement elements and making comparisons with relevant information. !t is a tool in

    decision6making processes related to stocks, bonds, and other financial instruments.

    • &upta and (effner 15HJ32 e%amined the differences in financial ratio averages between

    industries. The Conclusion of both the studies was that differences do e%ist in mean

     profitability, "ctivity, leverage and liquidity ratios amongst industry groups.

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    Chapter 1- RARCH +,H'*'L'G;

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    Research *esi%n-

    " research design is a plan of action to be carried out in connection with research pro$ect. !t is

    the conceptual structure within which research is conducted and it constitutes the blue print for 

    the collection and analysis of data.

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    its historical performance and current financial condition can be determined. The term *:"T!s assets correctly to increase the investor>s wealth.

    !t ensures a fair return to its owners and secures optimum utili;ation of firm>s assets.

    6. (t simplifies financial statement-

    The information given in the basic financial statements

    serves no useful purpose unless it is interpreted and analy;ed in some comparable terms. !t is one

    of the tools in hands of those who want to know more from the financial statements in the

    simplified manner.

    1. (t helps in determinin% the financial position of the concern-

      !t facilitates the management to know whether thefirm>s financial position is improving or deteriorating or constant over the years by setting a

    trend with the help of ratios.

    3. (t is helpful in bud%etin% and forecastin%-

      "ccounting ratio provide a reliable data, which can

     be compared, studied and analy;ed. These ratio provide sound footing for future prospects. The

    ratios can also serve as a basis for preparing budgeting future line of action.

    7. (t is helpful in determinin% li/uidit! position-

      #ith the help of ratio analysis conclusions can be

    drawn regarding the liquidity position of a firm. The liquidity position of a firm would be

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    satisfactory if it is able to meet its current obligation when they become due. The ability to meet

    short term liabilities is reflected in the liquidity ratio of a firm.

    5. (t is helpful in determinin% lon% term solvenc!-

      The long term solvency is measured by the

    leverage or capital structure and profitability ratio which shows the earning power and operating

    efficiency. Solvency ratio shows the relationship between total liability and total assets.

    Classification of ratios-

    "ccounting ratio may be broadly classified into following categories=

    2 "alance sheet ratio-

      :atios calculated from the different items of the 'alance sheet of a

    concern are called 'alance sheet ratios. A.g. Current ratio, Liquid ratio, -ebt Aquity ratio etc.

    6 Revenue statement ratio-

    :atios calculated from the different items of the ) L account of 

    a concern are called :evenue statement ratios. A.g. &ross profit ratio, ?et profit ratio, Stock 

    turnover ratio etc.

    1 +i0ed ratio-

    :atios computed taking accounting data from the balance sheet on the one

    side and from the )L account on the other, are called mi%ed ratios. A.g. !nventory turnover 

    ratio, working capital ratio etc.

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    Common sie statement-

    nder this method, financial statements are analy;ed to measure the relationship of various

    figures with some common base. #hile preparing the common si;e profit ) loss account, total

    sales is taken as common base and other items are e%pressed as a percentage of sales. Like this in

    order to prepare common si;e balance sheet, the total assets and total liabilities are taken as

    common base and all other items are e%pressed as a percentage of total assets and liabilities.

    (mportance-

    "nalysis of financial statement with the help of common si;e statement is more useful. 'ecause

    of the financial statements of different firms can be converted into uniform common si;e format

    irrespective of the si;e of individual items.

    !t establishes the relationship between sales and other items of income statement and this

    relationship is helpful in evaluating operational activities of a firm. #hereas, a common si;e

     balance sheet is very useful for comparing the profitability and financial position of two or more

    firms.

    Comparative statement=

     nder this form of comparative financial statement both the comparative profit ) loss account

    and comparative balance sheet are covered. Such comparative statements are prepared not only

    to the comparison of various figures of two or more period but also the relationship between

    various elements embodied in profit ) loss account and balance sheet.

    'bjective of comparative statement-

    52 To measure the financial position of a firm.

    32 To analy;e different items of assets and liabilities in absolute rupees i.e. balances on two

    or more comparative dates.

    72 To analy;e increase or decrease in rupee amounts as well as in percentage by taking the

    data of previous years as base.

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    82 To review the past financing and investing activities and their effect on the financial

     position of the firm.

    (mportance-

    52 !t helps in determining the future trends of assets, liabilities and capital which helps in the

     planning process.

    32 Comparative balance sheet shows not only the balances of accounts as on different dates

     but also the e%tent of their increase or decrease in various items of balance sheet between

    these dates.

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    Chapter 3- *A,A A)AL;( & F()*()G

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    "ALA)C H, 'F HUL-

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    PR'F(, & L' ACC'U), 'F HUL-

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    "ALA)C H, 'F GCPL-

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    PR'F(, & L' ACC'U), 'F GCPL-

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    Liquidity ratio=

    52 C::A?T :"T!

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    &raphical representation=

    !nterpretation=

    The ideal level of current ratio is 3=5. (igher the current ratio, the larger is the amount of rupees available

     per rupees of current liabilities, the more is the firm>s ability to meet current obligation and greater is

    safety of fund of short term creditors.

    (L>s current ratio is not better than its ideal level. 'ut if we see the current ratio of the company for last

    three years it has increased from year 345363457 to 345863459. The current ratio of company is near the

    ideal ratio. This depicts that company>s liquidity position is much better in previous years. !ts current

    assets are more than its current liabilities in 345763458 ) 345863459.

    &CL>s current ratio is not better than its ideal level. 'ut if we see the current ratio of the company for 

    last three years it has decreased from year 345363457 to 345763458 and then again increases from 34576

    3458 to 345863459. The current ratio of company is near the ideal ratio. This depicts that company>s

    liquidity position is much better in previous years. !ts current assets are more than its current liabilities in345363457.

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    32 Quick ratio=

      Quick ratio is a test of liquidity than the current ratio. The term liquidity refers to the

    ability of a firm to pay its short6term obligations as ) when they become due. Quick ratio may be defined

    as the relationship between quick or liquid assets and current liabilities. "n asset is said to be liquid if it is

    converted into cash within a short period without loss of value.

    Quick "ssets Current liabilities

    Cash in hand

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    &raphical representation=

    !nterpretation=

    Quick assets are those assets which can be converted into cash within a short period of time, say to si%

    months. So, here the sundry debtors which are with the long period does not include in the quick assets.

    " quick ratio is an !ndication that the firm is liquid and the ability to meet its current liabilities in time.

    The !deal quick ration is 5=5, Company Quick ratio is less than the ideal ratio. So, The Quick ratio of 

    (L is increasing year by year and the quick ratio of &CL !S decreased in 345763458 and then

    increases in 345863459.

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    72 Cash ratio=

    Cash ratio R 1cash ) bank balances current investments2 / current liabilities

    :atio=

    &raphical representation=

    !nterpretation=

    Cash ratio of (L increasing year by year and cash ratio of &CL is decreased in year 345763458 and

    again increased in 345863459.

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    82 !?A?T

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    92 +i%ed assets turnover ratio=

      !t is also known as sales to fi%ed assets ratio. This ratio measures the

    efficiency and profit earning capacity of the firm. (igher the ratio, greater is the intensive utili;ation of 

    fi%ed assets. Lower ratio means under6utili;ation of fi%ed assets.

    :atio=

    &raphical representation=

    !nterpretation=

    +"T< of both the companies 1(L ) &CL2 is decreasing year by year. This means there is

    underutili;ation of fi%ed assets in both the companies.

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    K2 Total assets turnover ratio=

    :atio=

    &raphical representation=

    !nterpretation=

    T"T< of (L is decreased in year 345763458and then again increases in year 345863459. #hile the

    T"T< of &CL is decreasing year by year.

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    J2 -ebt6assets ratio=

    :atio=

    &raphical representation=

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    I2 -ebt6equity ratio=

    :atio=

    &raphical representation=

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    H2 ?et profit margin=

      ?et profit ratio establishes a relationship between net profit 1after ta%2 and sales

    and indicates the efficiency of the management in manufacturing, selling administrative and other 

    activities of the firm. !t also indicates the firm>s capacity to face adverse economic conditions such as

     price competitors, low demand etc.

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    &raphical representation=

    !nterpretation=

    The net profit ratio is the overall measure of the firm>s ability to turn each rupee of income from services

    in net profit. !f the net margin is inadequate the firm will fail to achieve return on shareholder>s funds.

    (igh net profit ratio will help the firm service in the fall of income from services, rise in cost of 

     production or declining demand.

    (L>s net profit margin is decreasing year by year while &CL>s net profit margin is decreased in year 

    345763458 and then again increased in year 345863459.

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    542 :eturn on equity=

      :eturn on shareholder>s investment, popularly known as :eturn on investments

    1or2 return on shareholder>s or proprietor>s funds is the relationship between net profit 1after interest and

    ta%2 and the proprietor>s funds.

    :atio=

    &raphical representation=

    !nterpretation=

    The return on equity of both the company 1(L ) &CL2 is decreasing year by year.

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    552 :eturn on total assets=

      rofitability can be measured in terms of relationship between net profit and

    assets. This ratio is also known as profit6to6assets ratio. !t measures the profitability of investments. The

    overall profitability can be known.

    :atio=

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    &raphical representation=

    !?TA::AT"T!

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    Chapter 7- RCC'+)*A,(') & UGG,(')

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    'bservations & findin%s-

    • "s we know that ideal current ratio for any firm is 3=5. !f we see the current ratio of the

    (L for last three years it has increased from 345363457 to 345863459. This depicts thatcompany>s liquidity position is sound. !ts current assets are more than its current

    liabilities. #hile the current ratio of &CL for last three 345363457 to 345863459 is

    decreased then again increased which shows that the current liabilities is more than the

    current assets.

    • " quick ratio is an indication that the firm is liquid and has the ability to meet its current

    liabilities in time. The ideal quick ratio is 5=5. 'oth Company>s quick ratio is less than the ideal

    ratio. This shows both the company has liquidity problem.

    • !nventory conversion period shows that how many days> inventories take to convert from raw

    material to finished goods. !n the company inventory conversion period is decreasing. This shows

    the efficiency of management to convert the inventory into cash.

    • (L>s net profit margin is decreasing year by year while &CL>s net profit margin is decreased

    in year 345763458 and then again increased in year 345863459.

    • (L>s :

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    Suggestions=

    "fter interpretation and analysis, ! am giving certain suggestions to the company which ! hope may be

    helpful for the company.

    • The company should utili;e its stock more efficiently.

    • The company should pay attention towards the proper and efficient utili;ation of working capital.

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     "("L('GRAPH;

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