HUL Project

1

CHAPTER 1

1.1-INTRODUCTION

HINDUSTAN UNILEVER LIMITED started its journey before 75 years in 1933, when the company was

incorporated. Today, HUL is pre-eminent and its brands are household names across the country. HUL produced all the

products which are daily needs of the human being. All the products of the company are for the personal care like bath

soap, washing powder, tooth paste, tea, mineral water, hair care, deodorant, color cosmetics, ayurvedic and health care,

skin care etc. so HUL is there for take care of you

HUL always seen its roll beyond just profit curves as it endeavor to earn the love and respect of every Indian. This is

why social innovation remains at the center of our brands and business strategy. And it is with your continued support

that HUL have progressed on the path of sustainable and profitable growth. After all, doing well and doing well are two

sides of the same coin.

1.2-BASIC DETAIL

NAME HINDUSTAN UNILEVER

LIMITED

BUSINESS GROUP MNC Associate

INDUSTRY Personal care

BSE CODE 500696

NSE CODE HINDUNILVR

LTP (Rs.) 229.50 (3.49%) [NSE]

ISIN No INE030A01027

INCORPORATION 17/10/1933

Public issue date 17/11/1956

1. 3 – FACTORY LOCATIONS OF HUL

S.No. Location

Type Address

1 Shares Department Investors Service Department, Dakshna, 3rd Floor, Plot No

2, Sector 11,

New Mumbai , Maharashtra - India

Pin Code :400614

Phone :22827285,22827557/361,22827227/452,

Fax :22026712,

2 Factory/plant Barotiwala Khasra No .94-96,355-409, Village Balyana

Solan District , Himachal Pradesh - India

Pin Code :174103

3 Factory/plant BASTI. Khalitabad Factory . Plot No D34-D38.

Basti District , Uttar Pradesh - India

Pin Code :272175

4 Factory/plant ETAH- BEVERAGES. G T Road

Etah , Uttar Pradesh - India

Pin Code :207001

5 Factory/plant ETAH-INSTANT,TEA EXPORTS. Kasgani Road

Etah , Uttar Pradesh - India

6 Factory/plant HARIDWAR Plot No 1.Sector1A, Integrated Industrial

Estate,

Haridwar , Uttaranchal - India

Pin Code :249403

7 Factory/plant NALAGARH, Hudbust No 143. Khasra No 182.183.187/1.

Solan District , Himachal Pradesh - India

8 Factory/plant ORAI A-1 Industrial area . UPSIDC Orai,

Jalaun District , Uttar Pradesh - India

9 Factory/plant RAJPURA A-5. Phase 2-B, Focal Point

2

Rajpura , Punjab - India

Pin Code :140401

10 Factory/plant SUMERPUR A-1 UPSIDC, Industrial area Bharua,

Hamirpur , Uttar Pradesh - India

Pin Code :210502

13 Factory/plant COCHIN, Tatapuram PO

Cochin , Kerala - India

Pin Code :682014

14 Factory/plant COCHIN, Edapally

Cochin , Kerala - India

Pin Code :682024

15 Factory/plant DHARWAD Plot No 125/126. KIADB Indl Area

Dharwad , Karnataka - India

Pin Code :580011

16 Factory/plant HYDERABAD Uptal Kalan

Hyderabad , Andhra Pradesh - India

Pin Code :500039

17 Factory/plant TAMIL NADU Plot No 50 & 51. SIPCOT Industrial

Complex.

Hosur , Tamil Nadu - India

Pin Code :635109

18 Factory/plant MANGALORE Sultan Batter Road, Boloor

Mangalore , Karnataka - India

Pin Code :575003

19 Factory/plant MYSORE Plot No 424. HebbalIndl.Area

Mysore , Karnataka - India

Pin Code :570016

20 Factory/plant PONDICHERRY OFF NH45-A Vadamangalam

Pondicherry , Pondicherry - India

Pin Code :605102

21 Factory/plant PONDICHERRY No 3. Cuddalore Road, Kirumambakkam


Pin Code :607402

22 Factory/plant PONDICHERRY NH45-A Vadamangalam


Pin Code :605102

23 Factory/plant ASSAM Personal Products Factory Dag No 21 of 122 Fs

Grants

Tinsukia , Assam - India

Pin Code :786151

24 Factory/plant HALDIA Haldia Factory PO Durgachak.

Haldia , West Bengal - India

PinCode :721602

Phone :,,,

Fax :,

25 Factory/plant JALPAIGURI Dabgram Factory.1, Plot 21-23 WDIIDC

Growth Centre

Jalpaiguri , West Bengal - India

Pin Code :734435

26 Factory/plant KOLKATA kidderpore Factory 63 Garden Reach

Kolkata , West Bengal - India

Pin Code :700024

27 Factory/plant KOLKATA ICE CREAM Factory DHR 74. Dimand

Harbour Road


PinCode :700023

Phone :,,,

Fax :,

28 Factory/plant KOLKATA Kidderpore Factory 1 Transport Depot Road


Pin Code :700088

3

29 Factory/plant KOLKATA Modern Food Industries (india) Ltd P10

Taratola Road


Pin Code :700088

30 Factory/plant BULDHANA Khamgaon Factory C-9 MIDC Khamgaon

Buldhana District , Maharashtra - India

Pin Code :444303

31 Factory/plant CHHINDWARA Chhindwara Fasctory., 5/6 K M Stone

Chhindwara District , Madhya Pradesh - India

Pin Code :480002

32 Factory/plant CHIPLUN Plot No B-7, Lote Parshuram MIDC Post Box

6(Lote)

Chiplun , Maharashtra - India

Pin Code :415722

33 Factory/plant DAMAN Detergents Factory Plot No 34. Bhimpore Village,

Daman , Daman & Diu - India

Pin Code :396210

34 Factory/plant DAMAN Industrial Hygiene Unit Survey No 56/2 Plot No

17

Daman , Daman & Diu - India

Pin Code :396210

35 Factory/plant Detergents Factory Plot No 132-139, Kundaim Industrial

Estate Kundaim

Goa , Goa - India

Pin Code :403115

36 Factory/plant KALWA Bestfoods Divisions Plot No 7& 7A

Kalwa , Maharashtra - India

37 Factory/plant KANDLA Shed Nos 177 & 178 Sector-1, Plot Nos 253-257

Sector 4 ,

Kandla , Gujarat - India

Pin Code :370230

38 Factory/plant KANDLA Shed Nos 42/47. Sector2, Kandla Free Trade

Zone

Kandla , Gujarat - India

Pin Code :370230

39 Factory/plant NASIK Kwality Walls Ice Cream Division Plot A8/9.

Nasik , Maharashtra - India

Pin Code :422103

40 Factory/plant PUNE Tea Export Unit Nutan Wearhousing Complex

Pune , Maharashtra - India

Pin Code :412308

41 Factory/plant SILVASSA Detergents Factory Survey No 151/1/1, Village

Dapada

Silvassa , Dadra & Nagar Haveli - India

Pin Code :396230

42 Factory/plant SILVASSA Personal Products Factory Plot No 84/2, Demni

Village


43 Factory/plant SILVASSA Personal Products Factory Survey No 907.

Kilwati Road


44 Factory/plant SILVASSA Beverages Factory Orient Press Complex


Pin Code :396230

4

Karvy Computershare Private Ltd

Plot No. 17-24, Vittal Rao Nagar

Madhapur,

Hyderabad - 500081,

Andhra Pradesh

Sr.

No

NAME DESIGNATION

1 Harish Manwani Chairman

2 Nitin Paranjpe

CEO and Managing Director

3 D. Sundaram Vice Chairman and CFO

4 Gopal vittal

Executive Director, Home &

Personal Care

5 Dhaval Buch

Director

6 D. S. Parekh

Director

7 A. Narayan

Director

8 S. Ramadorai

Director

9 R. A. Mashelkar

Director

10 Mr. Shrijeet Mishra Executive Director

11 Mr. Ashok K Gupta Executive Director

12 Ms. Leena Nair Executive Director

13 Mr. C K Prahalad

Independent Director

1.4 - BOARD OF DIRECTORS OF HUL

KEY EXECUTIVES

S.No Name Designation

1 Mr.D Sundaram Chief Financial Officer

2 Mr.Ashok K Gupta Co.Secretary & Compl. Officer

3 Mr.Raju Thomas Vice President - Finance

1.5 - REGISTERED OFFICE Hindustan Lever House,

165/166,Backbay Reclamation,

Mumbai,

Maharashtra - 400020

1.6- REGISTAR & SHARE TRANSFER AGENT

5

1.7 - BANKER

Bankers Bank of America

HDFC Bank Ltd.

Citibank NA.

Deutsche Bank AG

Hongkong & Shanghai Banking Corporation Ltd.

Standard Chartered Bank

State Bank of India

ABN Amro Bank N.V.

Punjab National Bank

Corporation Bank

ICICI Bank Ltd.

Union Bank of India

Auditors LoveLock & Lewes

Registrar Karvy Computershare Private Ltd

1.8 – Capital structure

From

Year

To Year Class Of

Share

Authorized

Capital

(Crores)

Issued

Capital

(Crores)

Paid Up

Shares

(Nos)

Paid Up

Face Value

Paid Up

Capital

(Crores)

2007 2007 Equity Share 225.00 217.75 2177463355 1 217.75

2006 2006 Equity Share 225.00 220.68 2206776097 1 220.68

2005 2005 Equity Share 225.00 220.12 2201243793 1 220.12

2004 2004 Equity Share 225.00 220.12 2201243793 1 220.12

2003 2003 Equity Share 225.00 220.12 2201243793 1 220.12

2002 2002 Equity Share 225.00 220.12 2201243793 1 220.12

2001 2001 Equity Share 225.00 220.12 2201243793 1 220.12

1999 2000 Equity Share 225.00 220.06 2200595070 1 220.06

1996 1998 Equity Share 225.00 199.17 199167286 10 199.17

1994 1996 Equity Share 225.00 145.84 145838573 10 145.84

1993 1994 Equity Share 150.00 145.84 145838573 10 145.84

1992 1993 Equity Share 150.00 139.99 139986912 10 139.99

1990 1992 Equity Share 140.00 139.99 139986912 10 139.99

1987 1990 Equity Share 100.00 93.32 93324608 10 93.32

1983 1987 Equity Share 100.00 93.32 93324608 10 93.32

1981 1983 Equity Share 100.00 93.32 93324608 10 93.32

1979 1981 Equity Share 50.00 46.66 46662304 10 46.66

1978 1979 Equity Share 35.00 29.16 29163940 10 29.16

1977 1978 Equity Share 35.00 21.87 21872955 10 21.87

1974 1977 Equity Share 25.00 18.36 16852955 10 16.85

1970 1974 Equity Share 16.85 16.85 16852955 10 16.85

1966 1970 Equity Share 14.45 14.45 14445390 10 14.45

1965 1966 Equity Share 11.56 11.56 11556312 10 11.56

1962 1965 Equity Share 9.25 9.25 9141332 10 9.14

1956 1962 Equity Share 9.09 8.24 8243600 10 8.24

6

1952 1956 Equity Share 5.57 5.57 5570000 10 5.57

1937 1952 Equity Share 2.00 2.00 2000000 10 2.00

1933 1937 Equity Share 2.80 0.28 280000 10 0.28

1.9 – Accounting policy

Basis for preparation of accounts

The accounts have been prepared to comply in all material aspects with applicable accounting principles in India, the Accounting

Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956.

Revenue Recognition

Sales are recognized when goods are supplied and are recorded net of trade discounts, rebates, sales taxes and excise duties (on

goods manufactured and outsourced) but include, where applicable, export incentives such as duty drawbacks and premiums on

sale of import licenses. It does not include inter-divisional transfers.

Income from Property Development Activity is recognized in terms of arrangements with developers, where applicable.

Income from services rendered is booked based on agreements/ arrangements with the concerned parties.

Interest on investments is booked on a time proportion basis taking into account the amounts invested and the rate of interest.

Dividend income on investments is accounted for when the right to receive the payment is established.

Expenditure

Expenses are accounted for on accrual basis and provision is made for all known losses and liabilities. Advertising expenses are

charged against the profit of the year to which the activities relate.

Revenue expenditure on research and development is charged against the profit of the year in which it is incurred. Capital

expenditure on research and development is shown as an addition to fixed assets.

Fixed Assets

Fixed assets are stated at cost less accumulated depreciation.

Depreciation is provided (except in the case of leasehold land which is being amortized over the period of the lease) on the straight

line method and at the rates and in the manner specified in Schedule XIV of the Companies Act, 1956. However,

- certain employee perquisite-related assets are depreciated over four to six years, the period of the perquisite scheme

- computers and related assets are depreciated over four years

- certain assets of the cold chain are depreciated over four/seven years and

- motor vehicles are depreciated over six years.

Assets identified and evaluated technically as obsolete and held for disposal are stated at their estimated net realizable values.

Goodwill and other Intangible Assets

Intangible assets are stated at cost of acquisition less accumulated amortization. Goodwill and other Intangible assets (except

computer software) are amortized over the assets useful life not exceeding 10 years. Computer software is amortized over a period

of 5 years on the straight line method.

Impairment of Assets

Impairment loss, if any, is provided to the extent, the carrying amount of assets exceeds their recoverable amount. Recoverable

amount is higher of an assets net selling price and its value in use. Value in use is the present value of estimated future cash flows

expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

Investments

Investments are classified into current and long-term investments. Current investments are stated at the lower of cost and fair

value. Long-term investments are stated at cost. A provision for diminution is made to recognize a decline, other than temporary,

in the value of long-term investments.

Inventories

7

Inventories are valued at the lower of cost, computed on a weighted average basis, and estimated net realizable value, after

providing for cost of obsolescence and other anticipated losses, wherever considered necessary. Finished goods and work-in-

progress include costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Sundry Debtors and Loans and Advances

Sundry debtors and Loans and Advances are stated after making adequate provisions for doubtful balances.

Provisions

A provision is recognized when there is a present obligation as a result of a past event, it is probable that an outflow of resources

will be required to settle the obligation and in respect of which reliable estimate can be made. Provision is not discounted to its

present value and is determined based on the best estimate required to settle the obligation at the year end date. These are reviewed

at each year end date and adjusted to reflect the best current estimate.

Retirement/Post-Retirement Benefits

Contributions to Defined Contribution schemes such as Provident Fund, etc. are charged to the Profit and Loss account as incurred.

In respect of certain employees, Provident Fund contributions are made to a Trust administered by the Company. The interest rate

payable to the members of the Trust shall not be lower than the statutory rate of interest declared by the Central Government under

the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be made good by the Company.

The remaining contributions are made to a government administered Provident Fund towards which the Company has no further

obligations beyond its monthly contributions. The Company also provides for retirement / post-retirement benefits in the form of

gratuity, pensions, leave encashment and medical. Such benefits are provided for based on valuations, as at the balance sheet date,

made by independent actuaries. Termination benefits are recognized as an expense as and when incurred.

Taxes on Income

Current tax is determined as the amount of tax payable in respect of taxable income for the period.

Deferred tax is recognized, subject to the consideration of prudence, on timing differences, being the difference between taxable

incomes and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

Deferred tax assets are not recognized on unabsorbed depreciation and carry forward of losses unless there is virtual certainty that

sufficient future taxable income will be available against which such deferred tax assets can be realized. Foreign Currency

Translations

Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transaction. Gains and losses

resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign

currencies are recognized in the profit and loss account.

Segment Reporting

The accounting policies adopted for segment reporting are in line with the accounting policies of the Company with the following

additional policies for segment reporting:

a) Inter segment revenue have been accounted for based on the transaction price agreed to between segments which is primarily

market led.

b) Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the

segment. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis,

have been included under "Unallocated corporate expenses".

8

1.10 - PRODUCT PROFILE

Brooke Bond Brooke Bond Bru

Lipton

Kissan Kwality Wall's

Annapurna

Knorr

Lux Breeze

Lifebuoy Dove

Liril Pears

Hamam Rexona

Surf Excel Fair & Lovely

Rin Pond's

Wheel Vaseline

Aviance

Sunsilk Naturals Pepsodent

Clinic Closeup

Axe Lakme

Rexona

Ayush

9

CHAPTER-2

2.1-COMPARATIVE PROFIT & LOSS A/C

Figures in brackets represent deduction

(Rs. In lakhs)

2003 2002 % CHANGE

INCOME

Sales

Other income

Total (A)

1013835.32

45982.83

1059818.15

995485.30

38454.22

1033939.52

1.84

19.58

2.5

EXPENDITURE Operating Exp.

Depreciation

Interest

Total (B)

(816168.31)

(12478.43)

(6676.45)

(835323.19)

(799899.50)

(13410.06)

(918.40)

(814227.96)

2.03

-6.95

626.96

2.56

PROFIT BEFORE TAX & EXEPTIONAL

ITEMS (A-B) 224494.26 219711.56 21.77

Tax for the year -Current tax

-Deferred tax

Taxation adjustment of previous year

Total (C)

(42736.00)

(6094.00)

4769.00

(44061)

(45894.00)

(2091.00)

1405.17

(46579.83)

-6.88

191.43

239.39

-5.41

PROFIT AFTER TAXATION AND

BEFORE EXCEPTIONAL ITEMS

(A-B-C) = (D)

180433.96

173131.73 4.22

Exceptional items (net of tax) (E) (3254.56) 3841.90 15.29

NET PROFIT (D-E) 177179.40 176973.63 0.12

� In 2003, the sales registered a growth of 1.84% over 2002

� Profit of year 2003increase by 0.12%, which is less than the last year. � Increase in the other income by 19.28% is due to one-time gain earned from sale of shares of Indus Ind Bank during 2002-03.

� Expenditure increased by 2.56%, which is, grater than increase in sales by 1.84%.

10

Growth in year 2003 � Figures in %

Particulars 2003

INCOME 2.5

EXPENDITURE 2.56

PROFIT\(LOSS) FOR THE YEAR (PBT) 21.77

PROFIT\(LOSS) FOR THE YEAR (PAT) 4.22

Growth in percentage of the year 2003

0

5

10

15

20

25

INC OME E XP E NDIR UR E P B T P AT

11

2.2-PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 31st

DECEMBER, 2004


(Rs. In lakhs)

2004 2003 % CHAN

GE

INCOME

Sales

Other income

Total (A)

992694.64

31889.38

1024578.02

1013835.32

45982.83

1059818.15

-2.09

-30.66

-3.325


Depreciation

Interest

Total (B)

(848957.9)

(12089.94)

(12998.43)

(874046.27)

(816168.31)

(12478.43)

(6676.45)

(835323.19)

4.02

-3.11

94.7

4.64


ITEMS (A-B) 15031.75 224494.26 -32.95


-Deferred tax


Total (C)

(26600.00)

(5473.62)

1469.52

(30604.1)

(42736.00)

(6094.00)

4769.00

(44061)

-37.76

-10.18

-69.19

PROFIT AFTER TAXATION AND BEFORE

EXCEPTIONAL ITEMS (A-B-C) = (D)

119927.65 180433.96

-33.53

Exceptional items (net of tax) (E) (193.28) (3254.56) -94.06

NET PROFIT (D-E) 119734.37 177179.40 -32.47

� In 2004, the sales registered a decline of 2.09% over 2003.

� Profit of year 2004 decrease by 32.47%, because of decrease in sale and increase in exp.

� Other income of the company is also decrease by 30.66%,which also affect the profit of the firm


� In 2003 company sold some fixed assets, that income increase the profit of the company

12

Growth in year 2004 � Figures in %

Particulars 2004

INCOME -3.325

EXPENDITURE 4.64

PROFIT\(LOSS) FOR THE YEAR (PBT) -32.95

PROFIT\(LOSS) FOR THE YEAR (PAT) -32.47


-40

-30

-20

-10

0

10

INC O ME E XP E NDIT UR E P BT P AT

13


DECEMBER, 2005


(Rs. In lakhs)

2005 2004 % CHAN

GE

INCOME

Sales

Other income

Total (A)

1106054.62

30478.65

1136533.27

992694.64

31889.38

1024578.02

11.42

-4.41

10.93


Depreciation

Interest

Total (B)

(961721.5)

(12445.32)

(1919.31)

(976086.13)

(848957.9)

(12089.94)

(12998.43)

(874046.27)

13.28

2.94

-85.23

11.67


ITEMS (A-B) 160447.14 15031.75 6.59


-Deferred tax

-Fringe benefit tax


Total (C)

(22300.00)

(4100.00)

(3000.00)

4403.67

(24996.33)

(26600.00)

(5473.62)

---

1469.52

(30604.1)

-16.67

-25.01

----

12.94

-18.32



135450.81 119927.65 12.94

Exceptional items (net of tax) (E) 5359.63 (193.28)

NET PROFIT (D-E) 140810.44 119734.37 17.60

� In 2005, the sales registered a growth of 11.42% over 2004.

� Profit of year 2005 increase by 17.60%, because of increase in sale and decrease in exp. In this year interest paid is too much.


14

Growth in year 2005

� Figures in %

Particulars 2005

INCOME 10.93

EXPENDITURE 11.67




0

2

4

6

8

10

12

14

16

18

20

INC O ME E XP E NDITUR E P B T P A T

15


DECEMBER, 2006


(Rs. In lakhs)

2006 2005 % CHANGE

INCOME

Sales

Other income

Total (A)

1210338.62

35451.49

1245790.11

1106054.62

30478.65

1136533.27

9.42

16.32

9.61


Depreciation

Interest

Total (B)

(1045532.32)

(13016.35)

(1073.35)

(1059622.02)

(961721.5)

(12445.32)

(1919.31)

(976086.13)

8.71

4.59

-44.08

8.56


ITEMS (A-B) 186168.09 160447.14 16.03


-Deferred tax

-Fringe benefit tax


Total (C)

(26000.00)

(2680.00)

(3500.00)

(21.00)

(32201.00)

(22300.00)

(4100.00)

(3000.00)

4403.67

(24996.33)

16.59

-34.63

16.67

82.82

PROFIT AFTER TAXATION AND

BEFORE EXCEPTIONAL ITEMS

(A-B-C) = (D)

153967.09 135450.81 13.67

Exceptional items (net of tax) (E) 31570.25 5359.63 489.03

NET PROFIT (D-E) 185537.34 140810.44 31.76


� Profit of year 2006 increase by 31.76%, because of increase in other income is much higher as compare to the last year

� Expenditure increased by 8.56%, which is, less than increase in sales.

� Deferred tax is also low as compare to the 2005.

16

Growth in year 2006

� Figures in %

Particulars 2006

INCOME 9.61

EXPENDITURE 8.56




0

5

10

15

20

25

30

35

INC O ME E XP E NDITUR E P B T P A T

17


DECEMBER, 2007


(Rs. In lakhs)

2007 2006 % CHANGE

INCOME

Sales

Other income

Total (A)

1371775.37

46268.11

1418043.48

1210338.62

35451.49

1245790.11

13.33

30.51

13.83


Depreciation

Interest

Total (B)

(1183205.25)

(3835.90)

(2549.66)

(1199590.81)

(1045532.32)

(13016.35)

(1073.35)

(1059622.02)

13.17

6.3

137

13.21


ITEMS (A-B) 218452.67 186168.09 17.34


-Deferred tax

-Fringe benefit tax


Total (C)

(33821.00)

(3893.00)

(4000.00)

(167.11)

41546.89

(26000.00)

(2680.00)

(3500.00)

(21.00)

32201.00

30.08

45.26

14.28

695.7



176905.78 153967.09 14.09

Exceptional items (net of tax) (E) 15641.2 31570.25 50.46

NET PROFIT (D-E) 192546.98 185537.34 3.78


� Profit of year 2006 increase by 3.78%, Expenditure and income both are increase in nearly same ratio.

� Expenditure increased by 13.21%.

� This year tax liability is higher as compare to the last year, so profit after tax is low.

18

Growth in year 2007

� Figures in %

Particulars 2007

INCOME 13.83

EXPENDITURE 13.21




0

2

4

6

8

10

12

14

16

18

20

INC O ME E XP E NDITUR E P B T P AT

19

2.6 - COMPARATIVE GROWTH OF LAST FIVE YEARS

Growth in percent (%)

Particulars 2003 2004 2005 2006 2007

INCOME 2.5 -3.325 10.93 9.61 13.83

EXPENDITURE 2.56 4.64 11.67 8.56 13.21

PROFIT BEFORE TAX 21.77 -32.95 6.59 16.03 17.34

PROFIT AFTER TAX 4.22 -32.47 17.60 31.76 3.78

COMPARATIVE GROWTH OF LAST FIVE YEARS

-40

-30

-20

-10

0

10

20

30

40

INC O ME E XP E NDITUR E P B T P AT

2003

2004

2005

2006

2007

� The growth of HUL is mutually increased every year. Profit is decrease in 2004 as compare to 2003, because in 2003 sale of

fixed assets is high.

� Compared % profit is highest in 2006, because of highest sale is also registered in that year.

� Tax payment is also less as compare to other years, and exp. On interest is also less.

20

2.7 - STATUS OF INCOME, EXPENDITURE AND

PROFIT OF LAST FIVE YEARS

Rs. In lakhs

Particulars 2003 2004 2005 2006 2007

INCOME 1059818.15 1024578.02 1136533.27 1245790.11 1418043.48

EXPENDITURE 835323.19 874046.27 976086.13 1059622.02 1199590.81

PROFIT(PAT) 17719.40 119734.37 140810.44 185537.34 192546.98

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

INC OME E XP E NDITUR E P AT

2003

2004

2005

2006

2007

The above diagram shows that the profit of the company is increases every year. It shows very progressive status of the

company.

21

2.8 - SALES OF LAST FIVE YEARS

Rs in lakhs Particulars 2003 2004 2005 2006 2007

SALES 1013835.32 992694.64 1106054.62 1210338.62 1371775.37

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

2003 2004 2005 2006 2007

sales

From the above graph, we can see that the sale of the company is some what constant in 2003 and 2004. After that sale is

increase at higher rate and it would also help the company to gain maximum profit.

In 2004, the net sale of the company is 992694.64 lakh Rs. And after that it bounces to 1106054.62 lakh Rs. In 2005 at the growth rate

of 11.42%.

22

CHAPTER – 3

3.1 - COMPARATIVE BALANCE SHEET

BALANCE SHEET AS ON 31ST DECEMBER, 2003


(Rs. in lakhs)

SOURCES OF FUND 2003 2002 % CHNGE

Shareholders’ funds

Capital

Reserves & surplus

22012.44

191860.16

213872.60

22012.44

343875.14

365887.58

0

-44.2

Loan funds

Secured loan

Unsecured loan

160369.65

10060.79

170430.44

384303.04

1961.50

3868.26

5829.76

371717.34

8075.8

160.08

3.39

APPLICATION OF

FUND

Fixed assets

Gross block

Depri.& impairment loss

Net block

Capital work in progress

214171.54

(84608.96)

129562.58

7384.26

136946.84

199436.41

(77889.64)

121546.77

10686.88

132233.65

7.39

8.63

6.59

-30.9

INVESTMENTS 257493.08 236474.10 8.89

Deferred tax Deferred tax Assets

Deferred tax liabilities

37709.13

(10965.19)

26743.94

38730.63

(11738.49)

26992.14

-2.64

6.59

Current assets, loans and

advances

Inventories

Sundry debtors

Cash and bank balances

Other current assets

Loans and advances

139263.34

47085.01

80648.11

6249.81

76932.62

350178.89

127873.62

36785.04

94262.60

4630.22

79555.40

343106.88

8.91

28

14.44

34.98

-3.3

2.06

Current liabilities and

provisions

Liabilities

Provisions

(255948.3)

(131111.3)

(387059.7)

(246534.1)

(120555.3)

(367089.4)

3.82

8.76

5.44

Net current assets 36880.82

384303.04

23982.55

371717.34

53.78

3.39

� The Reserve & Surplus has been decreased by 42.2%

� The deferred tax liability – net is increased by 6.59%.

� The total fund of HUL has been decreased by 3.39%.

� The Fixed asset increased by 3.56% because of the addition in fixed assets this year is very less.

� Inventories have gone up to Rs. 139263.34 lakh Rs. compared to Rs. 127873.62 lakh Rs. as at 31st December, 2003. The

increase is in line with the activity increase.

� The high level of cash and bank balance is due to substantial collections from Debtors / Bill Discounting during the last few

days of the financial year.

23

3.2-BALANCE SHEET AS ON 31ST DECEMBER, 2004


(Rs. In lakh)



Capital

Reserves & surplus

22012.44

187258.5

209270.95

22012.44

191860.1

213872.6

0

2.4

Loan funds

Secured loan

Unsecured loan

145305.7

1805.67

147111.45

356382.40

160369.6

10060.79

170430.4

384303.0

9.39

82.05

7.27

APPLICATION OF

FUND

Fixed assets

Gross block


Net block


231421.9

(89108.0)

142313.8

9422.22

151756.06

214171.54

(84608.9)

129562.5

7384.26

136946.8

8.05

5.32

9.84

27.67

INVESTMENTS 222956.27 257493.1 13.41



36584.66

(13984.6)

22600.05

37709.13

(10965.1)

26743.94

2.98

27.54


advances

Inventories

Sundry debtors



Loans and advances

147044.2

48926.97

69804.80

5277.71

59441.79

330495.5

139263.3

47085.01

80648.11

6249.81

76932.62

350178.8

5.59

3.9

-13.45

-15.55

-22.74

-5.62


provisions

Liabilities

Provisions

(259079)

(112346)

(371425)

(255948)

(131111)

(387059)

1.22

14.31

4.04

Net current assets (40929.9)

356382.4

36880.82

384303.0

10.98

7.27

� In 2004, capital of the company remains constant, but the Reserve & Surplus has been increased by 2.4%



� The Fixed assets increased by 2.24% because of the addition in fixed assets.

� Net Current Assets as on 31.12.2004 stood at Rs. 356382 lakh Rs. as against the previous year level of Rs. 384303.04

� Inventories have gone up to Rs. 147044.36 lakh compared to Rs139263.34 lakh Rs. as at December 2004.

24



(Rs. In lakh)



Capital

Reserves & surplus

22012.44

208550.16

230562.6

22012.44

187258.5

209270.9

0

13.37

10.17

Loan funds

Secured loan

Unsecured loan

2449.96

3244.11

5694.07

236256.6

145305. 8

1805.67

147111.4

356382.4

-98.31

79.66

-33.68

APPLICATION OF

FUND

Fixed assets

Gross block


Net block


237511.02

(98961.28)

138549.74

9803.29

148353.0

231421.9

(89108.7)

142313.8

9422.22

151756.1

26.31

10.98

-2.64

-3.82

INVESTMENTS 201419.8 222956.3 -9.65



33868.17

(11853.71)

22014.46

36584.66

(13984.6)

22600.05

7.43

-2.59


advances

Inventories

Sundry debtors



Loans and advances

132176.91

52282.85

35503.19

2389.08

54949.65

277301.68

147044.3

48926.97

69804.80

5277.71

59441.79

330495.5

-10.11

6.86

-49.13

-54.73

-7.56

-16.1


provisions

Liabilities

Provisions

(296945.4)

(115886.8)

(412832.3)

(259079)

(112346)

(371425)

14.62

3.15

11.15

Net current assets (135531)

236256.7

(40930)

356382.4

-

231.13

-33.68

� Again in 2005, capital of the company remains constant, but the Reserve & Surplus has been increased by 13.27%

� The deferred tax liability – net is decreased by 2.59%.

� The total fund of HUL has been decreased by 33.68% because of big decline in secured loan, cash and bank balance.

� The Fixed assets decreased by 3.32%

� Net Current Assets as on 31.12.2004 stood at Rs. 236256.67 lakh Rs. as against the previous year level of Rs. 356382.4 lakh

Inventories have gone down to Rs. 132176.91 lakh compared to 147044.26 lakh Rs. as at December 2005.

25



(Rs. In lakhs)



Capital

Reserves & surplus

22067.76

250280.5

272348.27

22012.44

208550.2

230562.60

0.2

20

18.12

Loan funds

Secured loan

Unsecured loan

3712.90

3547.40

7260.30

279608.57

2449.96

3244.11

5694.07

236256.67

51.55

9.35

18.31

APPLICATION OF

FUND

Fixed assets

Gross block


Net block


246268.8

(106194)

140074.8

11026.03

151100.89

237511.0

(98961.3)

138549.7

9803.29

148353.03

3.69

7.31

1.1

12.47

INVESTMENTS 241393.15 201419.84 19.85



38542.59

(16087.8)

22454.7

33868.17

(11853.7)

22014.46

13.8

36.69


advances

Inventories

Sundry debtors



Loans and advances

154771.1

44037.10

41694.30

2173.23

74289.38

316965.5

132176.9

52282.85

35503.19

2389.08

54949.65

277301.68

17.09

-15.77

17.44

-9.03

25.8

14.30


provisions

Liabilities

Provisions

(320164)

(132141)

(132141)

(296945.)

(115886)

(412832)

7.82

14.02

9.56

Net current assets (135340.1)

279608.57

(135531)

236256.67

-0.14

18.31

� In 2006, capital of the company increase by just 0.2%, and the Reserve & Surplus has been increased by 20%


� The total fund of HUL has been increased by 18.31%.

� The Fixed assets increased by 12.47% because of the addition in fixed assets.

� Net Current Assets as on 31.12.2006 stood at Rs. 279608.57 lakh Rs. as against the previous year level of Rs. 236256.67

� Inventories have gone up to Rs. 154771.1 lakh compared to 132176.96 lakh Rs. as at December 2006.

26



(Rs. In lakhs)



Capital

Reserves & surplus

21774.63

122148.78

143923.41

22067.76

250280.5

272348.3

-1.33

-51.2

-47.55

Loan funds

Secured loan

Unsecured loan

2551.86

6301.17

8853.03

152776.44

3712.90

3547.40

7260.30

279608.5

-31.27

77.63

-45.36

APPLICATION OF

FUND

Fixed assets

Gross block


Net block


266907.72

(114657)

152250.33

18563.75

170814.08

246268.8

(106194)

140074.8

11026.03

151100.9

8.38

7.97

8.69

13.05

INVESTMENTS 144080.74 241393.2 -40.31



40371.06

(19132.3)

21238.75

38542.59

(16087.8)

22454.7

-5.4


advances

Inventories

Sundry debtors



Loans and advances

195359.86

44337.46

20089.21

1239.25

66718.17

327740.95

154771.1

44037.10

41694.30

2173.23

74289.38

316965.5

26.23

0.68

-51.83

-42.98

-10.2

3.4


provisions

Liabilities

Provisions

(383708.5)

(127389.5)

(511098.0)

(320164)

(132141)

(132141)

19.85

-3.6

13

Net current assets (183357)

152776.44

(135340)

279608.7

35.48

-45.36

� In 2007, capital of the decrease by 1.33%, the Reserve & Surplus has been decreased by 51.2%

� The deferred tax liability – net is decreased by5.4%.


� The Fixed assets increased by 13.05% because of the heavy purchase in fixed assets.

� Net Current Assets as on 31.12.2004 stood at Rs. 152776.44 lakhs Rs. as against the previous year level of Rs. 279608.57

� Inventories have gone up to Rs. 195359.86 lakh compared to 154771.1 lakhs Rs. as at December 2007.

27

3.6 - COMPOSITION OF SHAREHOLDER’S FUNDS & LIABILITIES IN

DIFFERENT YEARS

FIGURES ARE IN %

SHAREHOLDER’S FUND & LIABILITIES 2003 2004 2005 2006 2007

SHARE CAPITAL 2.8 2.97 3.33 2.95 3.19

RESERVE & SURPLUS 24.52 25.24 31.55 33.46 17.88

SECURED LOANS 20.5 19.59 0.37 0.42 0.38

UNSECURED LOANS 1.29 0.23 0.49 0.47 0.92

DEFERRED TAX LIABILITY 1.4 1.89 1.79 2.2 2.8

CURRENT LIABILITIES 32.72 34.93 44.93 42.8 56.18

PROVISIONS 16.77 15.15 17.54 17.7 18.65

TOTAL 100.00 100.00 100.00 100.00 100.00

0

10

20

30

40

50

60

2003 2004 2005 2006 2007

SHARECAPITALRESERVE &SURPLUSSECUREDLOANSUNSECUREDLOANSDEFERREDTAX LIABILITYCURRENTLIABILITIESPROVISIONS

28

3.7 - COMPOSITION OF ASSETS IN DIFFERENT YEARS

FIGURES ARE IN %

APPLICATION OF FUND 2003 2004 2005 2006 2007

FIXED ASSETS 17.4 20.18 22.09 19.74 23.69

CAPITAL WIP 1.0 1.34 1.5 1.56 2.89

INVESTMENTS 34.58 31.62 32.1 34.0 22.42

INVERTORIES 18.71 20.85 21.4 21.82 30.4

SUNDRY DEBTORS 6.32 6.93 8.3 6.2 6.9

CASH & BANK BALANCE 10.83 9.9 5.6 5.88 3.13

OTHER CURRENT ASSETS 0.83 0.75 0.31 0.31 0.19

LOANS & ADVANCES 10.33 8.43 8.7 10.47 10.38

TOTAL ASSETS 100.00 100.00 100.00 100.00 100.00

0

5

10

15

20

25

30

35

2003 2004 2005 2006 2007

FIXED ASSETS

CAPITAL WIP

INVESTMENTS

INVERTORIES

SUNDRY DEBTORS

CASH & BANK

BALANCE

OTHER CURRENT

ASSETS

29

CHAPTER:-4

COMMON SIZE STATEMENTS

Common size statement for PROFIT & LOSS ACCOUNT OF HUL.

2003

77.01

21.18

4.61

17.020.31

1.180.63

Operating

Exp.

Depreciation

Interest

Profit before Tax

Tax for year

Profit after Tax

EXCETIONAL ITEMS

2004

82.861.18

14.69

3.13

11.71

0.0211.69

1.27

Operating

Exp.

Depreciation

Interest

Profit before Tax

Tax for year

Profit after Tax

EXCETIONAL ITEMS

Net profit

Particulars 2007 2006 2005 2004 2003

Sales &other income 100 100 100 100 100

Expenditure.

Operating

Exp.

83.44 83.93 84.62 82.86 77.01

Depreciation 0.98 1.04 1.095 1.18 1.18

Interest 0.18 0.086 0.169 1.27 .63

Total 84.6 85.06 85.88 85.31 78.82

Profit before Tax 15.4 14.94 14.12 14.69 21.18

Less: Tax for year 2.94 2.585 2.59 3.13 4.61

Profit after Tax 12.45 12.36 11.92 11.71 17.02

EXCETIONAL

ITEMS

1.1 2.53 .472 .02 .31

Net profit 13.58 14.89 12.39 11.69 16.71

30

2005

84.62

14.12

2.59

11.92

0.47212.39

1.0950.169

Operating

Exp.

Depreciation

Interest

Profit before Tax

Tax for year

Profit after Tax

EXCETIONAL ITEMS

Net profit

2006

83.9314.94

2.585

12.36

2.53

14.89

1.040.086

Operating

Exp.

Depreciation

Interest

Profit before Tax

Tax for year

Profit after Tax

EXCETIONAL ITEMS

Net profit

2007

83.44

15.4

13.58

0.98

0.18

2.94

1.1

12.45

Operating

Exp.

Depreciation

Interest

Profit before Tax

Tax for year

Profit after Tax

EXCETIONAL ITEMS

Net profit

31

Common size statement for Balance sheet OF

HUL

Particulars 2007 2006 2005 2004 2003

Share holder’ fund

Capital 3.188 2.95 3.33 2.97 2.81

Reserves & surplus 17.88 33.46 31.55 25.24 24.52

Loans.

Secured loan .374 .5 .37 19.59 20.50

Unsecured loan .923 .47 .49 .24 1.29

Current liabilities

& Provisions.

74.83 60.47 62.46 50.07 49.48

Deferred Tax

liabilities

2.8 2.15 1.79 1.89 1.4

Total fund 100 100 100 100 100

ASSETS

Fix assets 25.01 20.2 22045 20.46 17.51

Investments 21.1 32.27 30.47 30.06 32.91

Inventories 28.6 20.09 30.47 30.06 32.91

Sundry debtors 6.5 5.89 7.91 6.6 6.02

Cash & bank

balance

2.9 5.57 5.37 9.41 10.31

Other current

assets

.18 .29 .36 .71 .8

Loans &Advances 9.78 9.93 8.31 8.00 9.83

Deferred tax assets 5.92 5.15 5.12 4.93 4.82

Total assets 100 100 100 100 100

SOURCES OF FUND FOR THE YEAR 2003

5.57

48.5440.57

2.552.77

SHARE CAPITAL

RESERVE &

SURPLUSSECURED

LOANSUNSECURED

LOANSDEFERRED TAX

LIABILITY

32


5.92

50.56

39.25

0.483.79

SHARE CAPITAL

RESERVE &

SURPLUS

SECURED LOANS

UNSECURED LOANS

DEFERRED TAX

LIABILITY

SORCES OF FUND FOR THE YEAR 2005

8.87

84.06

0.99

1.3

4.78 SHARE CAPITAL

RESERVE &

SURPLUS

SECURED LOANS

UNSECURED LOANS

DEFERRED TAX

LIABILITY


7.46

84.64

1.261.25.44

SHARE CAPITAL

RESERVE &

SURPLUS

SECURED LOANS

UNSECURED LOANS

DEFERRED TAX

LIABILITY


12.67

71.05

1.48

11.13

3.67

SHARE CAPITAL

RESERVE &

SURPLUS

SECURED LOANS

UNSECURED LOANS

DEFERRED TAX

LIABILITY

APPLICATION OF FUND FOR THE YEAR 2003

18.39

34.58

47.03

FIXED ASSETS

INVESTMENTS

NET CURRENT

ASSETS

33

APPLICATION OF FUND FOR THE YEAR2004

18.39

34.58

47.03

FIXED ASSETS

INVESTMENTS

NET CURRENT

ASSETS


23.66

32.12

44.22 FIXED ASSETS

INVESTMENTS

NET CURRENT ASSETS


FIXED ASSETS

INVESTMENTS

NET CURRENT

ASSETS


26.58

22.42

51

FIXED ASSETS

INVESTMENTS

NET CURRENT

ASSETS

34

CHAPTER:-5

TREND ANALYSIS

For studying the trend of various items of financial statements, figures of a single year are not enough. Comparative figures of

some more years are significant. Such comparative figures may be either absolute figure or may be presented in % form. If the

item of one year, which called base year, is compared with similar items of one year in the form of Percentage This method is

known as trend percentage method or trend ratio method.

(1) Trend analysis of sales:- (Taken 2003 as base year)

EXHIBIT 5.1.A

Particulars 2003 2004 2005 2006 2007

sales 100 97.91 109.09 119.38 135.31

GRAPH 5.1.A

� The graph shows little fluctuation in sales.

� From the table it is found that the there is Down ward trend in sales in year 2004.From 2005 on wards there

is an up ward trend.

� In year 2007, the sale is increased by 35.3%as compared to year 2003.

� In year 2003 the sales was of RS.(IN Lakhs) 1013835.32, while in year 2007 it increase to RS (IN Lakhs)

1371775.37.

� Constant increase in sales is good for company & also shows a favorable situation for company.

sales

100 97.9

109.1

119.4

135.3

0

20

40

60

80

100

120

140

160

2003 2004 2005 2006 2007 YEARS

PE

RC

EN

TA

GE

sales

35

(2) Trend analysis of Expenses:-

(Taken year 2003 as base year)

EXHIBIT 5.1.B

Particulars 2003 2004 2005 2006 2007

Expenses 100 104.6 116.9 126.9 143.6

GRAPH5.1.B

Expences

100 104.6116.9 126.9

143.6

0

50

100

150

200

1 2 3 4 52003 2004 2005 2006 2007

years

Perc

en

tag

es

Expences

� From this table & graph it is found that there is constant increase in the expenses of company from year 2003.

� The expenses were increase in 2007 by 39.37% as compare to expenses in year 2003, which is due to increase in sales &

manufacturing activities.

� Here the sales is increase in year 2007 by 35.30% as compare to year 2003, which shows that the company’s cost management

is not effective.

� The company’s expenses are RS.(IN lakhs) 835323.19 in year 2003, which increased to RS ( In lakhs) 1199590.81, in year

2007.

� It is not good for company as it increased at high rate & negatively affect to the profit of company.

36

(3) Trend analysis of Profit after tax:- (take 2003 as a base year)

EXHIBIT 5.1.C

Particulars 2003 2004 2005 2006 2007

Profit

after tax

100 66.47 75.07 85.3 98.05

GRAPH 5.1.C

Profit after tax

020

4060

80100

120

1 2 3 4 52003 2004 2005 2006 2007

] years

Pe

rce

nta

ge

s

Profit after tax

� The table & graph shows that there is continuous increase in the PAT from year 2005.

� As increase in expenses is high then increase in sales, any additional profit in relation to sales is not there.

� In year 2007, the PAT is decrease by 2% as compared to year 2003.

� The profit after tax in year 2003 is RS ( In lakhs)177179.40,

� Which is Rs. (In lakhs) 176905.78 in year 2007, which is due to high increase in expenses, are more then that of sales.

37

5.2. TREND FOR BALANCE SHEET

Particulars 2003 2004 2005 2006 2007

Share holder’ fund

Capital 100 100 100 100.25 98.9

Reserves & surplus 100 97.6 108.7 130.4 63.7

Loans.

Secured loan 100 90.6 1.53 2.31 1.59

Unsecured loan 100 17.95 32.24 35.3 62.6

Total fund 100 94.8 84.9 95.6 87.3

ASSETS

Fix assets 100 110.8 108.3 110.3 124.8

Investments 100 86.6 78.2 93.8 55.96

Inventories 100 105.6 94.9 111.1 140.3

Sundry debtors 100 103.9 111.04 93.5 94.2

Cash & bank balance 100 86.6 44.02 51.7 24.9

Other current

assets

100 84.5 38.23 34.8 19.83

Loans &Advances 100 77.3 33.4 96.6 86.7

Deferred tax assets 100 97.02 89.81 102.2 107.1

Total assets 100 94.82 84.5 95.6 87.3

38

5.2 TREND ANALYSIS FOR BALANCE SHEET:-

(1)Trend analysis of Inventories: - (Taken year 2003 as a base year)

EXHIBIT 5.2.A

Particulars 2003 2004 2005 2006 2007

Inventories 100 105.6 94.9 111.2 140.3

GRAPH5.2.A

� Here table & graph shows the fluctuating trend of inventories.

� It increase in year 2004 & falls in year 2005 & again shows an upward trend in year 2006 & 2007.

� Here the inventories is increased by 40.3% in year 2007 as compare to year 2003 which shows that more cash is blocked in the

inventories & it also affect to operating cycle negatively.

� In year 2003 the inventories are of RS. (in lakhs)139263.34, which is increased to RS.(in lakhs)195359.86 in year 2007, which

is not good for company as more cash is blocked in that.

Inventories

100 105.694.9

111.2

140.3

0

20

40

60

80

100

120

140

160

2003 2004 2005 2006 2007

YEARS

PE

RC

EN

TA

GE

Inventories

39

(2) Trend analysis of debtors :-( Taken year 2003 as a base year)

EXHIBIT 5.2.B

Particulars 2003 2004 2005 2006 2007

Debtors 100 103.9 111.1 93.5 94.2

GRAPH5.2.B

Debtors

100

103.9

111.1

93.5 94.2

80

85

90

95

100

105

110

115

2003 2004 2005 2006 2007

YEARS

PE

RC

EN

TA

GE

Debtors

� Here the table & graph shows that there is fluctuation in the debtors.

� In year 2004 & 2005 due to loss credit collection policy, while in past 2 years it declines due to strict credit

collection policy.

� As compare to year 2003 the debtors are decline by 5.8% in year 2007.

� In the year 2003 the debtors are of RS. (in lakhs)47085.01, which are decrease to RS. (in lakhs) 44337.46 in

year 2007, which shows that the company’s credit collection is become efficient compare to previous , which

shows favorable situation for company.

40

(3) Trend analysis of Cash & bank balance :-( Taken 2003 as a base year)

EXHIBIT 5.2.C

Particulars 2003 2004 2005 2006 2007

cash &

bank

balance

100 86.6 44.02 51.7 24.9

GRAPH5.2.C

� Here table & graph shows that the fluctuating trend in cash & bank balance.

� In year 2007 it falls by 75% as compared to 2003.

� In year 2003 the cash & bank balance was of RS.( in lakhs) 86048.11, which is decreased to RS.(in

lakhs)20086.21 in year 2007, which is not good for company.

� The decline in cash & bank balance over a period of time is due to 3reasons:

1. More cash is remain blocked in the inventory.

2. More credit with the debtors.

3. Due to less growth in sales compare to growth of expenses.

CASH & BANK BALANCE

10086.6

44.0251.7

24.9

0

20

40

60

80

100

120

2003 2004 2005 2006 2007

YEARS

PE

RC

EN

TA

GE

cash & bank

balance

41

(4) Trend analysis of Loans & advances :- (Taken year 2003 as a base year)

EXHIBIT 5.2.D

Particulars 2003 2004 2005 2006 2007

Loans &

advances

100 77.3 71.4 96.6 86.7

GRAPH 5.2.D

� Here the table & graph shows fluctuating trend over a period of time.

� In year 2004 & 2005 it is decline, in year 2006 it is increase & again in year 2007 it is increase.

� As compare to year 2003 the loans & advances are falls by 13.3% in year 2007, which is due to continuous

decrease in cash balance of company.

� In year 2003 the loans & advances are of RS. (in lakhs) 76932.62, which is decrease to RS (ion

lakhs)66718.17 in year 2007, which is decrease company’s current assets.

LOANS & ADVANCES

100

77.371.4

96.686.7

0

20

40

60

80

100

120

2003 2004 2005 2006 2007

YEARS

PE

RC

EN

TA

GE

LOANS &

ADVANCE

S

42

(5) Trend analysis of Investment :-( Taken year 2003 as a base year)

EXHIBIT 5.2.E

Particulars 2003 2004 2005 2006 2007

Investment 100 86.6 78.2 93.8 55.6

GRAPH5.2.E

Investment

10086.6

78.2

93.8

55.6

0

20

40

60

80

100

120

2003 2004 2005 2006 2007

YEARS

PE

RC

EN

TA

GE

Investment

� Here the graph & table shows the fluctuation in investment.

� In year 2004 & 2005 it falls, in year 2006 increase & again in year 2007 it falls.

� In year 2003 investment are of RS. (in lakhs)257493.08, which will increased to RS.( in lakhs)144080.74 in

year 2007, which is not good for company as the company dose not able to earn return on investment as it earns

previously.

� The investment is falls due to less availability of cash because of:-

1. More cash is blocked in the inventory.

2. More credit with the debtors

3. Due to less growth in sales compare to growth of expenses.

43

(6) Trend analysis for Capital :- (taken year 2003 as a base year)

EXHIBIT5.2.F

Particulars 2003 2004 2005 2006 2007

Capital 100 100 100 100.25 98.9

GRAPH5.2.F

Capital

100 100 100100.25

98.9

98

98.5

99

99.5

100

100.5

2003 2004 2005 2006 2007

YEARS

PE

RC

EN

TA

GE

Capital

Here the graph & table shows that mostly the capital is remain constant; no any significant change is there in the

capital. For first three years it remain constant & increase in year 2006 & decrease in year 2007.

The capital in year 2007 is decreased by 1.1% as compared to year 2003, which is very minor.

In year 2003 the capital is of RS.(In lakhs)22012.44,which is decreased to RS (in lakhs) 21774.63, in year

2007,which shows that the company is more depend on external sources to fulfill it’s long term finance need.

44

(7)Trend analysis of Reserves & surplus: - (Taken year 2003 as abase year)

EXHIBIT5.1.G

Particulars 2003 2004 2005 2006 2007

Reserves

& surplus

100 97.6 108.7 130.4 63.7

GRAPH5.1.G

Reserves & surplus

100 97.6108.7

130.4

63.7

0

20

40

60

80

100

120

140

2003 2004 2005 2006 2007

YEARS

PE

RC

EN

TA

GE

Reserves & surplus

� Here there is a fluctuation in Reserve & surplus over a period of time.

� It falls in year 2004& increase in 2005 & 2006,while again decrease in year 2007, which is 36.33% as

compared to year 2003.

� Here it is found that the company is going for trading on equity in year 2007 to increase return on equity ,

where it increase to 85% from 61.3% of previous year.

� In year 2003 the Reserve & surplus is of RS.(In lakhs)

191860.16, which are decreased to RS.(In lakhs) 122148.78 in year 2007, which is not good for company.

45

(8) Trend analysis of Fixed assets:- (Taken year 2003 as a base year)

EXHIBIT5.2.H

Particulars 2003 2004 2005 2006 2007

Fixed

assets

100 110.8 108.3 110.3 124.7

GRAPH5.2.G

Fixed assets

100110.8 108.3 110.3

124.7

0

20

40

60

80

100

120

140

2003 2004 2005 2006 2007

YEARS

PE

RC

EN

TA

GE

Fixed assets

� From this table & graph it can be said that the fixed assets shows fluctuation with increase in year 2004 ,

falls in year 2005 & increase in last 2 years.

� In Year 2007 it increased by 24.7% as compare to year 2003.

� The increase in fixed assets is due to increase in sales of company, which need more machinery, space &

transportation tools.

� In year 2003 fixed assets are of RS. (in lakhs)129562.58, which increased to RS. (in lakhs)170814.08 in year

2007, which is favorable for company.

46

(9) Trend analysis of Share holder’s Fund:- ( Taken year 2003 as a base year)

EXHIBIT5.2.I

Particulars 2003 2004 2005 2006 2007

Share holder’s

fund

100 97.9 107.8 127.3 67.3

GRAPH5.2.I

Share holder’s fund

100 97.9107.8

127.3

67.3

0

20

40

60

80

100

120

140

2003 2004 2005 2006 2007

YEARS

PE

RC

EN

TA

GE

Share holder’s fund

� The table & graph shows the fluctuate trend in the share holder’s fund, as it falls in year 2004, in year 2005

& 2006 it increase & again falls in year 2007.

� Year 2007 shows decrease in share holder’s fund by 32.7% compare to year 2003.

� In year 2003 the share holder’s fund is RS.(in lakhs) 213872.60, which is increased to RS.(in

lakhs)143923.41 in year 2007 due to falls in Reserve & surplus, which is not favorable for company.

47

(10) Trend analysis of Loans:- (Taken year 2003 as a base year)

EXHIBIT 5.2.J

Particulars 2003 2004 2005 2006 2007

Loans 100 86.3 33.4 42.6 51.9

GRAPH5.2.J

Loans

0

20

40

60

80

100

120

2003 2004 2005 2006 2007

YEARS

PE

RC

EN

TA

GE

Loans

� A High fluctuation is found in loans over a period of time. It decreased in year 2004 & 2005, and increase in

year 2006 & 2007.

� Year 2007 shows a decrease in Loans by 48% as compare to year 2003, which shows that company reduce

the use of debt.

� In year 2003 the loans are of RS. (in lakhs)170430.44, which are decreased to RS.(in lakhs)8853.03.

48

(11) Trend analysis of Current Liability & Provisions:- (Taken year 2003 as a base year )

EXHIBIT 5.2.K

Particulars 2003 2004 2005 2006 2007

Current

liability &

Provisions

100 95.96 106.7 116.9 132.05

GRAPH5.2.K

Current liability & Provisions

100 95.96106.7

116.9132.05

0

20

40

60

80

100

120

140

2003 2004 2005 2006 2007

YEARS

PE

RC

EN

TA

GE

Current liability &

Provisions

� The current liabilities & provisions are continuously increased from year 2005.

� In year 2007 the current liabilities & provisions are increase by 32.05% as compare to year 2003.

� In year 2003 the Current liabilities of company are of RS. (In lakhs) 387059.71, which is increase to RS. (in

lakhs) 511098.08 in year 2007, which is not good for company.

49

CHAPTER: 6 Analysis of cash flow statement

6.1. CASH FLOW STATMEANT FOR YEAR 2003

(A)CASH FLOW FROM OPERATING

ACTIVITIES

Profit before tax 224494.96

Adjustment for:

Depreciation

Foreign exchange

12478.43

5.00

Loss/(gain)on sale of fixed assets held for

disposal

(18.70)

Provision/(reversal of provision)for

diminution in value on investment, net of cost

over fair value of current investment

(2128.46)

Deficit/(surplus) on disposal of fixed assets (1076.15)

Surplus on disposal of investment(net) (4638.19)

Interest income (13872.27)

Provision for loss on disposal of fixed assets ---

Dividend income (8930.52)

Interest expenses 6676.45

Operating profit before w.c. charges 212990.55

Adjustment for:

Trade & other receivables (4468.29)

inventories (14620.17)

Trade payable & other liabilities 3345.79

Cash generated from operations 197247.88

Taxes paid (41044.65)

Cash flow before exceptional items 156203.23

Purchase of annuities in discharge of amount

payable to certain non-magt. Employees

(5718.20)

Compensation under v.r.s. (2442.00)

Amt. paid for ice cream restructuring

included in exceptional itmes

(394.83)

Consideration recd. from nihar & cococare

brand

---

Sales tax ---

Net cash from operating activities A 147648.20

(B) cash flow from investing activities:

Purchase of F.A. (23360.39)

Sales off F.A. 4039.52

Capital subsidy recd. 9.00

Purchase of investment

Sale of investment

(1121971.00)

1105815.67

interest recd. 12965.53

Dividend recd 8700.59

Sale proceeds of land included in exceptional

items

---

Consideration received on disposal of

subsidiary companies

----

Consideration received on disposal of L.T.

Investments

----

50

Consideration received on disposal of 51%

Shares in a subsidiary companies

---

Consideration received on sale of

functionalized bio-polymers business

---

Consideration received on transfer of sewri

undertaking to bon LTD.

---

Net cash from investing activities B (5269.56)

(c) cash flow from financing activities:

Dividend paid (284057.99)

Tax on distributed profit (36459.48)

Interest paid (81.34)

Bank over draft 3221.47

Borrowings 55776.58

Repayment of debentures 132074.63

Proceeds from share allotment under E.S.O.

Scheme

---

Repayment of borrowing (26472.00)

Net cash used in financing activities (155998.13)

Net increase in cash & cash

equipment(A+B+C)

(13619.49)

OPENING BALANCE 94265.87

CLOSING BALANCE 80646.4

• Operating activities:

• The company has good cash flow from operating activities of RS. (in lakhs) 147648.20,where the surplus on

disposal of investment, interest income & dividend income & the cash from operational activities are

major contributors.

• The interest expenses of company are also low & payment of income tax by company is very high.

• Investing activities:

• The company has invested highly in investment during year 2003 , with high sale of investment & purchase of

fixed assets is also high.

• The company received good income from interest & dividend, but the company has a negative cash flow from

investing activities of RS.(in lakhs) 5269.56

• Financing activities:

• Company pays high amount of dividend & tax on distributed profit with borrowings.

• Company has good income from debentures, but as payment is more it gives company a negative cash flow of

RS.(in lakhs)155998.13

• Because of negative cash flow in investing & Financing activities the company has final negative cash flow of

RS.(13619.49), which is not good for company, which reduce the closing balance to RS ( In lakhs) 80646.38.

51



ACTIVITIES


Adjustment for:

Depreciation

Foreign exchange

12089.94

(1.79) Surplus on disposable of fixes assets 21.64




(129.15)

Deficit/(surplus) on disposal of fixed assets 2675.49

Surplus on disposal of investment(net) (2450.29)





Adjustment for:

Trade & other receivables 12058.50


Trade payable & other liabilities (10860.34)





Purchase of annuities in discharge of amounts

payable to certain erstwhile

---

Amt. paid for ice cream included in

exceptional items

(228.75)







Sale of investment

(820318.31)

854664.78 interest recd. 10422.46


Sale of land included in exceptional items 9485.19



---


Investments

---



---

52



---



---

Net cash from investing activities B 31504.07





Bank over draft 923.01 Borrowings 58363.00

Repayment of debentures ---


Scheme

---




equipment(A+B+C)

(10841.52)


Foods products ltd. & Lipton ltd. ---

Cash as on 1-4-05 of lever India export ltd. ---

Cash as on1-4-2006 of vashisti detergent

LTD.

---


Operating activities:- Here, for HUL. In year2004 it is found that the profit before tax of company is high then

the net cash from operating activities, which shows that the cash is not fully released. The positive items here

are Depreciation of RS.(in lakhs)12089.94 & interest expenditure of RS.(in lakhs)12998.43


The HUL’s net cash flow from operations of130160.02 (Rs in Millions) is less than the sum of accrual based profit & depreciation

that equals Rs.150531.75, showing that the profit has not been fully realized in cash. From the cash flow statements, the main

positive item is the depreciation charge of Rs. 12089.94.

• Investing Activities:

Form the Investing Activities section; hul; payments for assets acquisition of Rs. (in lakhs) 32377.55 the expenditure financed

partly by:

a) Realizing Rs. (in lakhs) 9485.19 from the Sales of land

b) Realizing Rs. (in lakhs) 854664.78 from the Sale Of Investments, against purchase of RS.(820318.31).

c) Interest Revenue Rs. 48.95 & dividend 56.93. This has left a gap of Rs. 1335.85 to be financed from other sources.

• Financing Activities:

It is seen from the Financing Activities section that the HUL raised long-term borrowing Rs. 186.69 & repaid long term borrowing

Rs. 1162.88. Interest paid and dividend paid 166.96 & 1356.10 that carried out finance activities Rs. 2576.04.

• Net Cash Flow:

It is clear that the expansion in the plant & machinery during the period was major drain on cash. The net cash out flow from

investing activities of Rs. 691.72 was met from three sources:

1. Cash Flow from Operations, Rs. 3220.17

2. Proceeds from Issuance of Share Capital, Rs. 1335.85 (after repaying loans & disturbing interest and dividend).

3. Withdrawal from Cash Balance, Rs. 691.72.

That is Cash in Flow, which is good sign for company.

53

6.3 CASH FLOW STATMEANT FOR YEAR 2005


ACTIVITIES


Adjustment for:

Depreciation 12445.3

Surplus on disposable of investment (2779.3)




(110.9)

Deficiton disposal of fixed assets (465.7)

Discounting charges for employee stock

option

38.4


Provision for loss on disposal of fixed assets (192.8)




Adjustment for:

Trade & other receivables 2380.8

inventories 14762.6






Amt. recd. From LIC. under v.r.s. ---

Amt. paid for t.s.a (500.00)

Consideration received on sale of nihar &

cococare brand

---

Sales tax ---






54


Sale of investment

(752374.0)

79012.55



Cash flow from exceptional items 37361.4



6.2


Investments

5068.5



---



415.0



833.7






Bank over draft (435.8)

Borrowings 56386.6

Repayment of debentures (132074.6)


Scheme

---


Net cash used in financing activities C (274825.4)


equipment(A+B+C)

(34395.7)


Foods products ltd. & Lipton ltd. 28.7

Cash as on 1-4-05 of lever India export ltd. 65.3

Cash as on1-4-2006 of vashisti detergent

LTD.

---


55

Interpretation:


The HUL net cash flow from operations of the sum of accrual based profit before taxation & exceptional items is Rs.160447.1,

showing that the profit has not been fully realized in cash. From the cash flow statements, the main positive item is the depreciation

charge of Rs. 12445.3 Thus the company’s earning cannot be said to be of high quality. Increase in Inventories to Rs.132176.9 and

increase in debtors is to Rs. 52282.9 resulted in strain on the cash generated from generation.


Form the Investing Activities section; HUL Was made for acquisition of fix assets by Rs.17746.5, against sale of RS (in lakhs)2606.4.

The expenditure financed partly by:

a) Realizing Rs. 790125.5 from the Sale Of Investments, against purchase of RS(in lakhs) 752374.00

b) Interest Revenue Rs. 7138.4 & dividend 7606.6

c) Consideration received on disposal of L.T. Investments is of RS(in lakhs) 5068.5


It is seen from the Financing Activities section that the HUL has repaid long term borrowing Rs. 132074.6. Interest paid and dividend

paid 7830.1 & 109999.1 that carried out the net cash used in finance activities Rs. 27482.52, due to high payment of high dividend &

debenture during year.

• Net Cash Flow:

� Net Cash Flow from Operations, is of Rs. (in lakhs) 196744.9

� Net Cash Flow from investing activities is of, Rs. (in lakhs) 43684.8

� Net Cash used in financing activities, is of Rs. (in lakhs) (274825.4), which finally shows a decrease in closing

balance by RS.(In lakhs) 34395.7 to RS.(In lakhs) 35503.1

56

6.4 CASH FLOW STATMEANT FOR YEAR 2006


ACTIVITIES


Adjustment for:


Surplus on disposable of investment (1598.9)

Provision/(reversal of provision)for diminution

in value on investment, net of cost over fair

value of current investment

(174.8)

Deficit/(surplus) on disposal of fixed assets (1736.2)

Discounting charges for employee stock option 303.8


Provision for loss on disposal of fixed assets ---




Adjustment for:








Amt. recd. From LIC. under v.r.s. 2025.9

Amt. paid for t.s.a ---

Consideration received on sale of nihar & coco

care brand

22902.4

Sales tax (803.4)






57


Sale of investment

(973183.4)

913737.6



Cash flow from exceptional items (55057.9)

Consideration received on disposal of subsidiary

companies

10624.6


Investments

19429.3



5209.5

Consideration received on sale of functionalized

bio-polymers business

---



---

Net cash from investing activities B (19794.5)





Bank over draft 1824.2

Borrowings 28138.5

Repayment of debentures ---


Scheme

3392.2



Net increase in cash & cash equipment(A+B+C) 5214.9


Foods products ltd. & Lipton ltd. ---

Cash as on 1-4-05 of lever India export ltd. ---

Cash as on1-4-2006 of vashisti detergent LTD. 976.3


58

Interpretation:


The HUL net cash flow from operations of the sum of accrual based profit before taxation & exceptional items are

Rs186168.00.showing that the profit has not been fully realized in cash. From the cash flow statements, the main positive item is again

the depreciation charge of Rs. 13016.4 Thus the company’s earning cannot be said to be of high quality. Increase in Inventories to

Rs.154771.10 resulted in strain on the cash generated from generation.


Form the Investing Activities section; HUL Was made for acquisition of fix assets by Rs.15419.7, against sale of RS (in lakhs)4734.2

The expenditure financed are:

a) Realizing Rs. 913737.6 from the Sale Of Investments, against purchase of RS(in lakhs) 973183.4

b) Interest Revenue Rs. 6790.4 & dividend 8143.4, which is good revenue generation for company.

c) Consideration received on disposal of L.T. Investments is of RS(in lakhs) 19429.3


It is seen from the Financing Activities section that the HUL has Interest paid and dividend paid 1338.2 & 121070.1 that carried out

the net cash used in finance activities Rs. 134772.8, due to high payment of high dividend & during year.

• Net Cash Flow:

� Net Cash Flow from Operations, is of Rs. (in lakhs) 196744.9

� Net Cash Flow from investing activities is of, Rs. (in lakhs) 43684.8

� Net Cash used in financing activities, is of Rs. (in lakhs) (274825.4), which finally shows a decrease in closing

balance by RS.(In lakhs) 34395.7 to RS.(In lakhs) 35503.1

59



ACTIVITIES


Adjustment for:


Surplus on disposable of investment net (7065.17)

Provision/(reversal of provision)for diminution

in value on investment, net of cost over fair

value of current investment

149.76

Deficit/(surplus) on disposal of fixed assets

(3115.46) Discounting charges for employee stock option ---





Adjustment for:








Amt. recd. From LIC. under v.r.s. ---

Amt. paid for t.s.a ---

Consideration received on sale of sangam brand 500.00

Sales tax ---



Purchase of Fixed assets (32928.17)

Sales off Fixed assets 8041.81

Capital subsidy recd. ---

Purchase of investment (1415055.48)

Sale of investment 1514867.36



Cash flow from exceptional items 92247.90



---

Consideration received on disposal of unused

land & building

10128.37





Interest paid (2553.96) Bank over draft 1531.65

Borrowings 65128.80

Buy back of equity share (62627.25)

60

Cost in relation to buyback of share (526.54)

Proceeds from share allotment under employee

stock option scheme

1236.30




equipment(A+B+C)

(21746.63)


Cash and cash equivalents as at 1-1-07 of

Modern food industries ltd.

110.42

Cash and cash equivalents as at 28-2-2007 of

Daverashola Estates Ltd.

28.12

Cash and cash equivalents as at 31st

December

(Closing cash balance)

20086.21

61

Interpretation:


The hul’s net cash flow from operations of 168011.42 (Rs in Millions) is less than the profit before taxation & exceptional items Rs.

218452.67, showing that the profit has not been fully realized in cash. From the cash flow statements, the main positive item is the

depreciation charge of Rs. 13835.90.Increase in Inventories was Rs. 3477.99 and increase in debtors is Rs. resulted in strain on the

cash generated from generation.


Form the Investing Activities section; HUL has payments for assets acquisition of Rs. 32928.17 & sale of assets is of RS.(In

lakhs)8041.81 The expenditure financed are:

a) Realizing Rs. 1514867.36 from the Sale Of Investments, against purchase of RS .(In lakhs)1415055.48

b) Interest Revenue Rs. 7025.89 & dividend of RS.(in lakhs)10298.49


It is seen from the Financing Activities section that the HUL has repaid long term borrowing Rs. 65128.80. Interest paid and

dividend paid 2553.96 & 195447.12 , which take out major part of opening cash balance & reduce the closing cash balance at RS.(in

lakhs) 20086.21

• Net Cash Flow:

1 Net Cash Flow from Operations, Rs.168011.42;

2 Net cash Flow from the investing activities is of RS102376.27,

3 Net Cash used to in financing activities is of RS.(292134.22), Which leads to falls in closing balance.

62

CHAPTER:7

RATIO ANALYSIS &COMMON SIZE ANALYSIS

The relationship of one item to another expressed in a simple mathematical form is known as the “RATIO”. A ratio is a

quotient to two numbers. It must be interpreted against some standard. In assessing the financial stability of a firm, a

management should, part form profitability, be interested in relative figures. A ratio is of major importance for financial

analysis; it engages qualitative measurement & shows precisely how adequate is one key item in relation to another. To

evaluate the financial condition & the purpose of the firm the financial analyst needs certain yardsticks. The yardsticks

frequently used in ratio or an index relating two pieces of financial data to each other’s.

UTILITY OF RATIO ANALYSIS:

1. Probability.

2. Liquidity.

3. Efficiency.

4. Inter – Firm Comparison.

5. Indicates Trend.

6. Useful of Budgetary Controls.

7. Useful for Decision Making.

This ratio analysis contains seven types of ratio as below:

1 Profitability Ratios.

2 Liquidity Ratios.

3 Solvency Ratio

4 Market valuation Ratios

5 Capitalization Ratio

6 Financial Ratio

7 Growth Ratio

1) Profitability Ratios:-

Profitability ratio measures the degree of operating success of a company in an accounting period. Two types of profitability ratios

are there.

1. Profit Margin Ratios.

2. Rate of Return Ratios.

A profit margin ratio shows the relationship between profit & sales. Three popular profits margin ratios are:

• Gross Profit Margin Ratios.

• Net Profit Margin Ratios.

• Operating Profit Ratios.

63

(1)Gross profit margin ratio:-

It shows the margin left after meeting manufacturing costs. It measures the efficiency of production as well as

pricing.

Gross Profit Margin Ratio = Gross Profit/ Sales X 100

EXHIBIT 7.1.A

Particular 2003 2004 2005 2006 2007

Net Sales 1015188.58 992694.64 1106054.6 1210338.62 1371775.37

Cost of Goods Sold 828646.70 861047.84 974166.80 1058548.7

1197041.15

Gross Profit. 185188.58 131646.8 131887.80 151789.92 174734.22

Gross Profit

Ratios.

18.27% 13.26% 11.92% 12.54% 12.74%

GRAPH7.1.A

Gross profit ratio

18.27

13.2611.92 12.54 12.74

0

5

10

15

20

2003 2004 2005 2006 2007

years

perc

enta

ge

Series1

� Here the Gross profit ratio is decrease in year 2004, 2005 & a small increase is in past 2 years, which is also not at satisfactory

level.

� In year 2007 it is only 12.74 % which low & it is because of high cost of good sold.

� Compare to year 2003 there is 5.53 % decrease in the ratio which is not good for company & the company should take

necessary steps to increase to it.

64

(2) Net Profit Margin Ratios:-

It is most significant of all revenue ratios as it indicates the ultimate profitability of the firm. This ratio is useful to the shareholders

for knowing the EPS and to investors in judging the prospects of return on their investments higher ratio indicated higher

profitability.

Net Profit Margin Ratio = Net Profit / Sales x 100.

EXHIBIT 7.1.B (Rs in Millions)

Particular 2003 2004 2005 2006 2007

Net Profit. 177179.4 119734.37 140810.30 185537.40 192546.98

Sales. 1013835.32 992694.64 1106054.60 1210338.62 1371775.37

Net Profit

Ratio.

17.48% 12.06% 12.73% 15.33% 14.04%

Chart7.1.B

net profit ratio

17.5

12.06 12.73

15.3314.04

0

5

10

15

20

2003 2004 2005 2006 2007

years

perc

en

tag

e

Series1

� Here, The Table shoes that Net profit ratio fluctuating.

� In year 2003 it is at 17.48% but in 2004, at 12.06%

� From 2005 on wards, it is a start to increase which is shows better Profitability & satisfactory level.

65

(3)Operating Profit Ratio: - This ratio indicate the portion that the cost of sales bears to sales cost of sales includes direct cost of good sold as well as operating

expenses, administrative, selling & distribution expenses which, have matching relationship with sales. It is calculated as:

Operating Profit ratio = Operating Profit / Sales X 100.

EXHIBIT 7.1.C (Rs. In lakh)

EXHIBIT 7.1.C

Operating Profit Ratio.

18.27%

13.26%11.92% 12.54%

13.75%

0.00%

5.00%

10.00%

15.00%

20.00%

2003 2004 2005 2006 2007

YEARS

PERCENTAG

E

Operating Profit Ratio.

� Here the operating ratio is fluctuated over a period of time.

� In year 2004 it comes to13.26% from 18.27% of year 2003. Again falls in 2005 & from year 2006 it starts to increase.

� The fluctuation is due to fluctuated expenses, which the company is needed to control as after year 2003 the operating profit

dose not show satisfactory level of performance.

Rate of return ratios reflects the relationship between Profit & Investments. Important rate of return ratios

measures are:

• Return on assets or Return on investments.

• Return on equity.

• Profit margin.

• Assets turn over.

• Earning per share.

Particular 2003 2004 2005 2006 2007

Operating

Profit.

185188.58 131646.80 131887.80 151789.90

188570.12

Sales. 1013835.32 992694.64 1106054.60 1210338.62 1371775.37

Operating

Profit

Ratio.

18.27% 13.26% 11.92% 12.54% 13.75%

66

(4) Return on Assets:-It Measures firm’s efficiency to use assets.

It indicates how many times the assets were turned over in a period &generated sales.

RETURN ON ASSETS = PROFIT AFTER TAX / AVERAGE TOTAL ASSETS

EXHIBIT7.1.D

Particular 2003 2004 2005 2006 2007

Profit After Tax. 180433.96 119927.65 135450.8 153967.10 176905.78

P Y Total Assets 750545.26 782327.94 741792.5 660942.7 748002.2

CY Total Assets 782327.94 741792.5 660942.7 74800.22 683007.4

Average Total Assets. 766436.6 762060.2 701368.0 704472.45 715504.8

Return on Assets Ratio 23.54% 15.74% 19.31% 21.86% 24.72%

GRAPH 7.1.D

RETURN ON INVESTMENT

0

23.54%

15.74%19.31%

21.86%24.72%

0

0.05

0.1

0.15

0.2

0.25

0.3

2003 2004 2005 2006 2007

YEARS

PE

RC

EN

TA

GE

RETURN ON

INVESTMENT

� Here, the table saws that asset turn over are high, which shoes that company manage its asset efficiently.

� There is a continuous increase in return on asset, from 2005 onwards, which means that the firm uses its asset efficiently.

� In year 2003 the assets turn over ratio of company is 23.54%, which in year 2007 with some increase came at 24.72% , which

is good for company.

� The company can further go for high turn over of assets & can increase the sales turn over.

67

(5) Return on Equity:-

It measures the profitability from a general level of investment. It is indicator of overall performance of company.

Return on Equity = Profit after Tax / Average Shareholder’s Equity x 100

EXHIBIT 7.1.E (Rs. in Millions)

Particular 2003 2004 2005 2006 2007

PAT 180433.96 119927.65 135450.8 153967.10 176905.78

P Y Shareholder’s Equity 365887.58 213872.6 209270.1 270562.6 272348.3

CY Shareholder’s Equity 213872.6 209270.1 270562.6 272348.3 143923.41

Average Shareholder’s Equity 289880.09 211571.35 219916.35 271455.45 208135.855

Return on Equity Ratio 62.24% 56.70% 61.6% 61.23% 85%

GHAPH7.1.E

Return on Equity Ratio

62.24%56.70% 61.60% 61.23%

85%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

2003 2004 2005 2006 2007

YEARS

PE

RC

EN

TA

GE

Return on Equity Ratio

� Table shoes the fluctuating Return on equity.

� Return on equity in year2007, indicates that the company earned more per rupee of share holder’s fund than rupee of assets.

� In year 2003 the ratio is at 62.24% which reach to 85% in year 2007, with increase of 22.76% due to decrease in equity.

� Here; the company used more debt & reduce equity capital in 2007, which increase return on investment from 61% to 85%,

which is done by trading on equity & the company should go further for it.

68

(6)Asset turn over:-Asset turn over measures the company’s efficiency to utilize it’s assets.

Asset turn over = sales/average total assets.

EXHIBIT-7.1.F

Particulars 2003 2004 2005 2006 2007

Sales 1013835.32 992694.64 110605.46 1210338.62 1371775.37

P.Y.Assets 750545.26 782327.94 741792.5 660942.7 748002.7

C.Y.assets 782327.94 741792.50 660942.7 74802.70 683007.4

Average

total assets

766436.6 762060.22 70136.8 70447.25 71550.5

Assets

Turn over

1.32 times 1.3 times 1.58times 1.72 times 1.92times

GRAPH 7.1.F

� After2003, only in 2004 there is a down ward trend.

� But from 2005 on wards, there is continuous improvement in assets turn over.

� In 2007, the asset turn over is increased by 45.5% compare to 2003, which shows that the company is manage its assets

efficiently.

� Compare to year 2003 , the assets turn over become fast in year 2007, which indicates that the company is efficiently use it’s

assets & the company can also go further for it.

ASSETS TURN OVER

1.32 1.31.58 1.72

1.92

0

0.5

1

1.5

2

2.5

2003 2004 2005 2006 2007

YEARS

TIM

ES

69

(7) Earnings per share: Financial analysts regard the EPS as an important measure of profitability.

It is helpful in comparing performance over time period.

EPS=Profit after tax/weighted average no. of equity shares.

EXHIBIT7.1.G

Particulars 2003 2004 2005 2006 2007

Profit

after tax

180433.96 119927.65 135450.70 153967.09 176905.78

Weighted

avg. no. of

equity

shares

22022.44

Shares

22012.44

shares

22012.44

shares

22067.80

shares

21774.63

shares

EPS RS.8.19 RS.5.45 RS.6.15 RS.6.98 RS.8.12

GRAPH7.1.G

Earning per share

8.19

5.456.15

6.98

8.12

0

1

2

3

4

5

6

7

8

9

2003 2004 2005 2006 2007

years

RS

.

� In 2003, EPS is RS.8.19, while in year 2004 it decline by 33.5% as compare to year 2003.

� From year 2005, the EPS shows a continuous increase but it is not at a satisfactory level.

� As compare to year 2003 there is minor decrease in EPS in year 2007, from year 2004 it shows continuous increase in it,

which shows that the profitability of firm is increased.

� Here, firm’s profitability is not remaining stable over a period of 5 years & it is fluctuated.

70

2. Liquidity ratio:-

Liquidity is the ability of a business to meet its short term obligations when they fall due. A firm should have enough cash &

current assets which can be converted into cash so that it can pay it’s suppliers. For evaluating HUL’s liquidity we take following

four ratios.

1. Current ratio

2. Quick ratio

3. Debtor turn over

4. Inventory turn over.

(1)Current ratio: It indicates company’s ability to pay its debt’s in short term.

It shows the amount of current assets a company has per rupee of current liability.

Current ratio= Current assets/ Current liability

EXHIBIT7.2.A

Particulars 2003 2004 2005 2006 2007

Current

assets

350178.89 330495.53 277301.70 316965.50 327740.95

Current

Liability

387059.71 371425.51 412832.30 452305.70 511098.08

Current

ratio

0.91 0.89 0.67 0.71 0.64

GRAPH7.2.A

Current ratio

0.905 0.89

0.67 0.70.64

0

0.2

0.4

0.6

0.8

1

2003 2004 2005 2006 2007

years

pe

rce

nta

ge

� The current ratio is declines from 2003, continuously; only in 2006 it shows up ward trend.

� As compare to year 2003, it falls by 29.67% in year 2007, which is due to decline in current assets & increase in current

liability.

� Decline in current ratio indicates in present the company has fewer current assets to meet current liabilities, which is not

good for short term creditors.

71

(2) Quick ratio:-Current ratio is not satisfactory measure liquidity as it includes Inventories.

Quick ratio is also known as Acid test ratio. This ratio relates more liquid current assets, to current liability.

EXHIBIT7.2.B

Particulars 2003 2004 2005 2006 2007

Quick

assets

210915.55 183451.27 145124.8 162194.40 132381.09

Current

Liability

387059.71 371425.51 412832.3 452305.70 511098.08

Quick

ratio

0.55 0.49 0.35 0.36 0.26

GRAPH7.2.B

Quick ratio

0.550.49

0.35 0.36

0.26

0

0.1

0.2

0.3

0.4

0.5

0.6

2003 2004 2005 2006 2007

YEARS

Rs.

Quick ratio

� Here, Quick ratio is decrease continuously, only on year 2006 it shows up ward trend.

� As compare to year 2003 the ratio become less than half in year 2007 which shows that the inventory consist major part of

current assets & the company has very less liquid assets as compare to current liabilities

.

� Decline continuously in Quick ratio shows that the firm dose not has much liquid assets as it’s current obligations, So that the

company may have difficulty in paying those obligations.

72

(3)Debtor turn over:-

It is the ability of a company to collect credit from it’s customers.

It measures the efficiency of credit & collection of firm.

It shows the no. of times each year Debtors turned into cash.

EXHIBIT7.2.C

Particulars 2003 2004 2005 2006 2007

Sales 1013835.32 992694.64 1106054.6 1210338.6 1371775.37

P.Y.Debtors 36785.04 47085.01 48927.0 52282.9 44037.10

C.Y.Debtors 47085.01 48927.0 52282.9 44037.1 44337.46

Average

Debtors

41935.025 48006.005 50605.3 48160.0 44187.28

Debtor turn

over

24.18 20.68 21.86 25.13 31.04

GRAPH7.2.C

Debtors turn over ratio

24.2

20.7 21.925.1

31.01

0

5

10

15

20

25

30

35

2003 2004 2005 2006 2007

years

Days

� Here, the table shows that in year 2004 only there is down ward trend, while from year 2005 it starts to increase.

� As compare to year 2003, it is increase by 28.37% in year 2007, which shows that the company’s credit collection policy is

improved.

� A high debtor turn over ratio of company is indicates that, Debtors are being converted rapidly into cash & quality of the

company’s portfolio of debtors is good.

� Higher debtor turn over indicates better management of Receivables.

73

Average debt collection period: It shows the time period of collection from debtors.

EXHIBIT7.2.D

Particulars 2003 2004 2005 2006 2007

Days 360

Days

360Days 360Days 360Days 360Days

Debtor turn

over ratio

24.18 20.68 21.86 25.13 31.04

Avg. debt

Collection

period

14.90 17.41 16.47 14.33 11.60

GRAPH7.2.D

Average debt collection period

14.9

17.416.5

14.3

11.6

0

5

10

15

20

2003 2004 2005 2006 2007

Years

Days

� Only in year 2004, it shows high debt collection period.

� From year 2005 on wards, it starts to decline which indicates that the company is improving in credit collection & the cash

is released quickly.

� As compare to year 2003 the average debt collection period in year 2007 is falls by 3.3 days , which shows that the

company has better credit collection & if the company go for further they would able to reduce the period & can get convert their

credit into cash quickly.

74

(4) Inventory turn over:-It shows the no. of tomes the inventory of company is turned into cash. Lesser the inventory

means, grater the cash available to company to meet it’s operating needs & Vis a versa.

EXHIBIT7.2.E

Particulars 2003 2004 2005 2006 2007

Cost of good

sold

828646.8 861047.84 974166.8 1058548.7 1197041.15

P.Y.Inventory 127873.62 139263.34 147044.3 132176.9 154771.1

C.Y.Inventory 139263.34 147044.30 132176.9 154771.1 195359.86

Avg.

inventory

133568.48 143753.82 139610.6 143474 175065.48

Inventory

turn over.

6.2times 6 times 6.98times 7.38 times 6.84times

GRAPH7.2.E

Inventory turn over ratio

6.2 6

77.4

6.8

0

1

2

3

4

5

6

7

8

2003 2004 2005 2006 2007

years

Tim

es

� From the table it is found that the Inventory turn over is decline in year 2004, increase in year 2005 & 2006, & again decline

in year 2007. Here the inventory turn over is fluctuating from year to year.

� It shows that the inventory management is not effective & more cash is blocked in inventory.

� As compare to year 2003, the inventory turn over is increase in year 2007, due to better inventory management, but it is not

also at satisfactory level. So the company has to do further better inventory management.

75

Operating cycle:-

The total time taken to convert inventory into cash, is the operating cycle of business.

It consists of 2 parts:

1. The time taken to turn inventory into debtors via sales

2. The time taken to turn debtors into cash

EXHIBIT7.2F

Particulars 2003 2004 2005 2006 2007

Debt collection

period

14.9 17.41 16.47 14.33 11.60

Inventory

holding period

58.06 60.0 51.58 48.78 52.63

Operating

cycle

72.96 77.41 68.05 63.11 64.23

GRAPH7.2F

� From this table it is found that, there is fluctuation in operating cycle.

� The Operating cycle period is increase in year 2004 & falls in year 2005 & 2006 & in year 2007 minor rise due to increase

in inventory holding period.

� As operating cycle times is declines as compare to 2003 & 2004, shows that company’s fund is held up in receivables in

inventory for shorter period which results in saving in interest, storage & other expose.

76

(7) Cash Flow Coverage

Cash flow coverage = (PAT + depreciation) / interest

EXHIBIT 7.2.G

GRAPH 7.2.G

cash flow coverage ratio

28.89

10.15

77.05

136.95

74.8

0

20

40

60

80

100

120

140

160

2003 2004 2005 2006 2007

Yeras

Perc

enta

ge

� Debt payments are made with cash, not with “earnings,” so this estimates cash coverage.

� Here, it is found that the cash flow coverage ratio is fluctuated over a period of time.

� In year 2004 it is decrease due to high interest expenses.

� In year 2006 ratio is increase as the interest expenses are decrease.

CASH FLOW COVERAGE 2003 2004 2005 2006 2007

PAT 180433.96 119927.65 135450.9 133967.2 176905.78

DEPRICIATION 12478.43 12089.94 12445.3 13016.35 13835.9

INTEREST 6676.45 12998.43 1919.3 1073.3 2549.66

CASH FLOW COVERAGE 28.89 10.15 77.05 136.95 74.8

77

3. Solvency Ratios:-

The long term solvency of a firm is affected by the extent use of debt to finance the assets of company.

The presences of heavy debt in company’s capital structure are thought to reduce the company’s solvency because debt is more

risky then equity. Solvency ratios are:-

� The debt to equity ratio

� Liability to equity ratio

� Interest cover ratio

(1)Debt-to-equity ratio:-It measures the relation ship between capital provided by the creditors to amount provided

by share holders.

EXHIBIT7.3.A

Particulars 2003 2004 2005 2006 2007

Secured loan 160369.65 145305.78 2450.0 3712.9 2551.86

Un-secured

loan

10660.79 1805.67 3244.1 3547.4 6301.17

Equity 213872.60 209270.95 230562.6 272348.3 143923.41

Debt-to-equity

ratio

79.70% 70.10% 2.5% 3.00% 6.2%

GRAPH7.3.A

Debt-to-Equity ratio

79.7

70.1

2.5 3 6.2

0

10

20

30

40

50

60

70

80

90

2003 2004 2005 2006 2007

years

perc

en

tag

e

� Table shows that from year 2004, Debt to equity ratio starts to decline, only in year 2007 it shows the upward trend.

� A high ratio in year 2007 indicates aggressive use of leverage & more risk for creditors.

� Here in year 2007, the company is reduce it’s equity capital & increase the debt, which shows that the company use to do trading

on equity. Company highly use the debt &able to increase return on equity.

� As compare to year 2003 it is low in year 2007, which should be increase by more use of debt as compare to equity.

78

(2)Liability to equity ratio:-It is more useful in case of firms that keep rolling over short term obligations.

EXHIBIT7.3.B

Particulars 2003 2004 2005 2006 2007

Debt 171030.44 147111.45 5694.1 7260.30 8853.03

Current

liabilities

387059.71 371425.50 412832.30 452305.70 511098.08

Equity 213872.60 209270.95 230562.60 272348.30 143923.41

Liquidity to

equity ratio

2.61 2.48 1.82 1.69 3.61

GRAPH7.3.B

Liquidity-to-equity ratio

2.6 2.5

1.8 1.7

3.6

0

0.5

1

1.5

2

2.5

3

3.5

4

2003 2004 2005 2006 2007

years

tim

es

� Here the ratio is fluctuated.

� In year 2005 & 2006 it is low due to high debt and current liability

� In 2007 it is high due to increase in current liabilities.

79

(3)Interest cover:-

It measures the protection available to the creditors for payment of interest charges by the company.

The extent of interest cover depends on profit, debt level & interest level.

It shows that whether the company has sufficient income to cover its interest requirement by wide margin or not.

EXHIBIT7.3.C

Particulars 2003 2004 2005 2006 2007

PBIT 185188.58 131646.80 131887.98 151789.90 174734.22

Interest exps. 6676.45 12998.43 1919.3 1073.40 2549.66

Interest cover

ratio

27.74

times

10.13

times

68.72

times

141.41

times

68.53

times

GRAPH7.3.C

Interest cover ratio

27.5410.13

68.72

141.41

68.53

0

20

40

60

80

100

120

140

160

2003 2004 2005 2006 2007

years

Tim

es

� Here, the table shows that the ratio is fluctuated because the interest expenses are fluctuated.

� In year 2004 it falls, but in year 2005 &2006 it will increase, again in year 2007 it is fluctuated.

� As compare to year 2003, the company is in good position year 2007 in terms of interest cover.

� Here in year 2003 &2004, the company dose not has sufficient income to cover interest expenses, while in year 2005,2006

&2007, they has sufficient income to cover interest expenses.

80

4. Marketability Ratio:-

(1) Price earning ratio:- The Price earnings ratio is computed by dividing current market price of share by the

Earning per Share. Price earnings ratio is an indicator of growth prospects. A high price earnings ratio indicates that the stock

market’s confidence in company’s future earnings.

EXHIBIT7.4.A

Particulars 2003 2004 2005 2006 2007

Average stock

price

135 148 RS.190.68 RS.229.28 211.125

Earnings Per

Share

RS.8.19 RS.5.45 RS.6.15 RS.6.98 RS.8.12

Price earnings

ratio

16.48

Times

27.15

Times

31.00

Times

32.85

Times

26.00

Times

GRAPH 7.4.A

Price earning ratio

16.48

27.1531 32.85

26

0

10

20

30

40

2003 2004 2005 2006 2007

YEARS

TIM

ES

� As the table & graph here shows that there is a fluctuation in price earning

� After continuously increasing from 16.48 to 32.85 in year 2006, it is falls in 2007 to 26 times which is due to falls in avg.

stock price.

� As still the PE ratio is high, it indicates the market’s greater faith in future of HUL.

81

(2)Dividend yield ratio: - The Dividend yield represents the current cash return to share holders. I t is computed by

dividing the dividend per share by the current market price per share.

EXHIBIT7.4.B

Particulars 2003 2004 2005 2006 2007

DPS 5 6 6 5 6

Avg. Stock Price 135 148 190.68 229.28 211.125

Dividend yield

ratio

3.7% 4.05% 2.62% 2.62% 2.84%

GRAPH 7.4.B

Dividend yield ratio

3.70% 4.05%

2.62% 2.62% 2.84%

0.00%

2.00%

4.00%

6.00%

2003 2004 2005 2006 2007

YEARS

PE

RC

EN

TA

GE

� As shown in the graph and the table, the ratio is falls in 2005 and a small increase in 2007. Company is paying almost stable

dividend in last three years to the share holders.

82

(3) Return on capital employed ratio:- This ratio is shows the relation ship between (profit after tax+ interest) and (equity + R&S + all debts)

It shows how well the company is able to generate a good return from its capital employed that is both debt and equity.

EXHIBIT 7.4.C

RETURN ON CAPITAL EMPLOYED

48.7 37.358.14 55.45

117.46

0

50

100

150

2003 2004 2005 2006 2007

YEARS

PE

RC

EN

TA

GE

� From the above graph and table, it is found that return on the capital employed is fluctuated.

� In year 2003, it was at 48.70%, falls in 2004 due to high interest and falls in debt and again increases in 2005 due to low

interest expenses. From 2006 it will increased.

� A high increase in 2007, it shows that the company has do efficient use of capital to generate return on capital employed.

83

5. CAPITALISATION RATIO

(1) LF = total assets / shareholders’ equity

EXHIBIT 7.5.A

E

GRAPH 7.5.A

ASSETS-TO-EQUITY RATIO

2.28 2.30

1.85 1.72

3.46

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

2003 2004 2005 2006 2007

YEARS

TIM

ES

� A measure of how leveraged the company is, i.e., its use of debt rather than equity to finance its assets. The larger the number,

the more leveraged it is. When there is no debt, the ratio of assets to equity is equal to 1.

� Here, the ratio is fluctuated over the period of times. In year 2005 &2006 it is low as more equity is used as compare to the

debt to finance the assets.

� In year 2007 the ratio is increase due to decrease in use of equity in that year.

Particulars 2003 2004 2005 2006 2007

Total assets 487125.73 482251.59 425654.7 468066.4 498555.03

Share holder's

equity 213872.6 209270.95 230562.6 272348.27 143923.41

Assets to equity ratio 2.28 2.30 1.85 1.72 3.46

84

6. FINANCIAL RATIOS:-

(1) Payout Ratio

Payout Ratio = dividends paid / net income

EXHIBIT 7.6.A

Particulars 2003 2004 2005 2006 2007

Dividend 284058 120868 109999 121070 195447

Income 1059818 1024578 1136533 1245790 1418043

RETENTION

RATIO 26.8 11.8 9.68 9.71 13.8

GRAPH 7.6.A

Pay-out ratio

26.8

11.8 9.68 9.7113.8

0

10

20

30

2003 2004 2005 2006 2007

Years

Pe

rce

nta

ge

� It is the percentage of earnings paid out in dividends to stockholders.

� Here; the ratio is fluctuated over a period of time.

� In year 2003 ratio is high due to high dividend is paid.

� In year 2005 &2006 ratio is decrease due to fewer dividends is paid in relation to the income, again in year 2007 the ratio is

increase due to high dividend paid.

85

(2)Retention ratio

Retention Ratio = 1 – payout ratio

EXHIBIT 7.6.B

Particulars 2003 2004 2005 2006 2007

Retention ratio 0.73 0.88 0.9 0.9 0.86

GRAPH 7.6.B

Retention ratio

0.730.88 0.9 0.9 0.86

0

0.5

1

2003 2004 2005 2006 2007

Years

Perc

en

tag

e

� It shows the percentage of earnings retained within the firm

� The ratio is shows little fluctuation over a period of time.

� The company is retain major part of it’s earning in the business.

� In year 2003 & 2007 less earning is retained in the business, due to more dividends paid out of it.

� In year 2004, 2005 & 2006 more earning is retained by giving less dividend.

86

7. GROWTH RATIO

(1) Sustainable Growth Rate

Sustainable Growth Rate = ROE x retention ratio

EXHIBIT 7.7.A

Particulars 2003 2004 2005 2006 2007

Retention

ratio 0.73 0.88 0.9 0.9 0.86

return on

equity 62.24 56.7 61.6 61.23 85

sustainable

growth rate 45.4 49.9 55.4 55.1 73.1

GRAPH 7.7.A

sustanable growth rate

45.4 49.9 55.4 55.173.1

0

20

40

60

80

2003 2004 2005 2006 2007

Years

Pe

rce

nta

ge

� The maximum rate at which the company can grow using internally generated funds; growth beyond this level requires

additional capital (debt and/or equity).

� There is high ratio over a period of time due to increase in return on equity in last three years & along with that the retention

ratio is also increase.

� In year 2007 it shows a good sustainable growth rate for company.

87

ANALYSIS OF PROFIT & LOSSACCOUNT

� In sales & other income there is significant increase over period of time, which is favorable for company.

� With the increase of sales the operating expenses of company are increase which are needed to be control as it grow more

faster then sales.

� Due to the high expenses, the profit before tax is also falls in last 4 years, which is not good & favorable for company.

� With that the profit after tax is also falls in first 2 years due to high current taxes.

88

ANALYSIS OF BALANCE SHEET

� There is minor change in capital in period, but reserve & surplus are reduced in year 2007 significantly.

� Secured loans are also decrease after year 2004, which help to company to reduce it’s interest expenses from RS.(In

lakhs)6676.45 to RS. (In lakhs) 2549.66, by 38.2%.

� Along with deferred tax liabilities, current liabilities & provisions are increased.

� Fixed assets are increase due to increase in sales.

� Investment is reduced by company significantly from RS.(in lakhs)257493.08, to RS.(in lakhs)144080.74, by 44.05%, which

is not good for company as it negatively affects to it income.

� Inventory is increase highly, so high amount of cash is blocked in it which reduces cash balance.

� Loans are remains fluctuated.

89

CHAPTER-8

DU PONT CHART

Profit margin & assets turnover are the two drivers of return on assets. The Du Pont System of financial analysis clearly brings out

the effects of these two drivers on return on assets. A system is useful for analysis, which considers important inter relationship

based on information found in financial statements.

Importance Of Du Pont Chart:

Any decision affecting the product price per unit costs, volume or efficiency has an impact on the profit margin or turnover ratios.

Similarly any decision affecting the amount & ratio of debt or equity used will affect the financial structure & the overall cost of

capital of a company. Therefore, these financial concepts are very important to evaluate as every business is competing for Limited

Capital Resources. Understanding the inter relationship among the various ratios such as turnover ratio, average & probability

ratios helps companies to put their money areas where the risk adjusted return is the maximum.

The chart used by “Du Pont Company” of U.S.A is known as Du Pont Chart.

This is the Du Pont Chart applied to HUL At the left of the Du Pont Chart is the return on the assets defined as the product of the

Net Profit Margin & the Total Assets Turnover Ratio.

Net Profit Total Assets = Net Profit / Sales X Net Sales / Avg. Total Assets.

Such decomposition helps in understanding how the Net Profit Margin & Total Assets Turnover Ratio influences the Return on

Total Assets.

90

Chart 8.1

DU PONT CHART FOR THE YEAR 2003

Net Profit

Margin 17.5 % X

Return on Assets

23.5%

Total Assets

Turnover 1.32%

Net Sales

1013835.32

Average total

Assets 766436.6

PAT

177179.40

Net Sales

1013835.32

Average

fixed

Assets125

554.68

Average

Investment

246983.6

Average

current

assets

346642.89

Avg.

Misc.

Exp.

47255.42

/ /

+ + + -

91

Chart 8.2


Net Profit

Margin 12.08 % X

Return on

Assets15.7 %

Total Assets

Turnover 1.3 %

Net Sales

992694.64

Average total

Assets

762060.22

PAT

119734.37

Net Sales

992694.64

Average

fixed

Assets

144351.45

Average

Investment

240224.675

Average

net current

assets

340337.21

Avg.

Misc.

Exp.

37146.9

3737146.9

/ /

+ + + -

92

CHART8.3


Net Profit

Margin 12.25 % X

Return on

Assets19.35 %

Total Assets

Turnover 1.58 %

Net Sales

1106054.6

Average total

Assets

701368.00

PAT

135450.8

Net Sales

1106054.6

Average

fixed

Assets

150054.5

Average

Investment

212188.4

Average

net current

assets

303898.6s

Avg.

Misc.

Exp.

35226.5

/ /

+ + + -

93

CHART8.4


Net Profit

Margin 12.72 % X

Return on

Assets 21.87%

Total Assets

Turnover 1.72 %

Net Sales

1210338.6

Average total

Assets 704472.5

PAT

153967.1

Net Sales

1210338.6

Average

fixed

Assets

149727.14

Average

Investment

221406.5

Average

net current

assets

297133.6

Avg.

Misc.

Exp.

36205.4

/ /

+ + + -

94

CHART8.5


Net Profit

Margin 12.90 % X

Return on

Assets 24.8%

Total Assets

Turnover 1.92 %

Net Sales

1371775.37

Average total

Assets

715505.00

PAT

176905.8

Net Sales

1371775.37

Average

fixed

Assets

160957.5

Average

Investment

192736.9

Average

net current

assets

322353.3

Avg.

Misc.

Exp.

39457.3

/ /

+ + +

95

CHAPTER: 9:-Recommendation &Suggestions

Following are some Recommendations & Suggestions for company which can help them to improve their

financial performance.

• The sales of the company are needed to be increase at faster rate compare to expenses. Here, the expenses

are increase at high rate compare to sales in last 4 year, which affects to profit negatively. The cost control

should be done efficiently as the cost absorbs major part of revenue, the company should control it. Better cost

management will help to company to earn good profit which also helps to increase the Earning per Share.

• It is found that the current liabilities are very high compare to current assets, which is needed to be control

by company as the ratio falls year by year.

• In the year 2007, the level of inventory is high, which blocks cash. Then, the company should make it’s

inventory management better, which help to the company to reduce operating cycle time. More over the cash is

also released, which will help to the company to increase its cash balance & the company can perform the

further activities easily.

• One another suggestions for cash is that, the credit collection policy is needed to be strict, which can help

to the firm in convert credit into cash & company has more cash compare to previous , with less debt collection

period.

• The company should further increase the use of debt which will help them to increase the return on equity,

but the company should see that the debt is needed to be at low rate other wise it will increase the interest

expenses & affect to interest cover ability of firm negatively.

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