A

Financial analysis report on

PROJECT GUIDE:
PROF. SHREEDA SHAH

SUBMITTE
D BY:
NAME
:

Mayur P. Barot
CLASS

S.Y. B.B.A
DIVISION :

NO :

09

SUBMITTED TO:

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A
ROLL

Opp. Law garden, Ellis bridge Ahmedabad380006

PREFACE
The financial manager is not in a passive role of scorekeeper
of the accounting information and arranging fund. Whenever
directed to do so he occupies a key position in top
management and plays a dynamic role in solving the complex
management problem, he is how responsible for shaping the
fortunes of enterprise & is involved in The subject matter of
financial management has been changing at a repaid pace about
three decades ago, the scope of financial management was
circumscribed to the raising of fund, whenever needed if
little significance used to be attached to the financial decision
making of problem solving the mid fifties, the emphasis
shifted to wise utilization of fund. The Modern thinking in
financial management gives greater IMPORTANCE TO
MANAGEMENT gives grater importance to management and
decision making policy. Today the most vital management
decision of allocation of capital. The new economic eForms created a challenging environment in the economics.
A number of new tools & techniques have been
developed to meet the needs of modern business that works
in complex environment. A no of old science has been
developed on fresh limes to meet the requirements of modern
business. We as a student management can not keep over
selves isolated from this filed of financial management we
nee to know the practical application of or other theoretical
knowledge so I have prepared a financial report on
COLGATE-PALMOLIVE LIMITED. & have tried to analysis
each report of annual report of three successive year & put it
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in a logical format as per analysis.

ACKNOWLEDGEMENT
In our course, as part, we have to prepare financial report on
a company; I have prepared the report on THE COLGATEPALMOLIVE LIMITED
Its my honor to prepare report on Indias no.1 textile
industries. I would like to thank our Prof. Mrs. Shreeda shah who
gave us guidance & enough information to finish our project
easily. I would also like to thank our director sir V.B.Patel for
giving us the opportunity to show our talent in financial field.
Mayur P. Barot
S.Y. B.B.A
DIV.:
ROLL NO:

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A
09

NO. PARTICULARS

PAGE NO.

1.

HISTORY OF THE COMPANY

2.

COMPANYS BACKGROUND

INTERNATIONAL EXAPATION

COMPANY OVERVIEW

11

DIRECTORS REPORT

13

BUSINESS PERFORMANCE

14

AUDIT REPORT

22

RATIO ANALYSIS

26

PROFIT & LOSS ACCOUNT

86

10

BALANCE SHEET

89

11

COMMON SIZE STATEMENT

92

12

CASH FLOW STATEMENT

96

13

CONCLUSION

100

14

BIBLIOGRAPHY

101

INDEX

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5|Page

HISTORY OF THE COMPANY

Public
Company
Incorporated:
1806 as The Colgate
Company
Employees:
36,000
Sales:
$19.45
billion
(2009)
Stock Exchanges: New York Euro next Frankfurt London
Zurich
Ticker
Symbol:
CL
NAIC: 311111 Dog and Cat Food Manufacturing; 325611 Soap
and Other Detergent Manufacturing; 325612 Polish and Other
Sanitation Good Manufacturing; 325620 Toilet Preparation
Manufacturing; 325998 All Other Miscellaneous Chemical
Product and Preparation Manufacturing; 335211 Electric
House wares and Household Fan Manufacturing; 339994
Broom, Brush, and Mop Manufacturing
Colgate-Palmolive Company's growth from a small candle and
soap manufacturer to one of the most powerful consumer
products giants in the world is the result of aggressive
acquisition of other companies, persistent attempts to overtake
its major U.S. competition, and an early emphasis on building
a global presence overseas where little competition existed. The
company is organized around four core segmentsoral care,
personal care, home care, and pet nutritionthat market such
well-known brands as Colgate toothpaste, Irish Spring soap,
Soft-soap liquid soap, Mennen deodorant, Palmolive and Ajax
dishwashing liquid, Ajax cleanser, Murphy's oil soap, Fab
laundry detergent, Soup line and Suavity fabric softeners, and
Hill's Science Diet and Hill's Prescription Diet pet foods.
Colgate-Palmolive has operations in more than 200 countries
and generates about 70 percent of its revenue outside the
United States.
Bayard Colgate as president in 1933.
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COMPANY BACKGROUND
Name of the company:

COLGATE-PALMOLIVE LTD.

Home Registered office:

300
New
York,
U.S.A.
Telephone:
Toll
Free:
Fax: (212) 310-2475

Park
New

York

(212)
(800)

Avenue
10022-7499
310-2000
850-2654

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

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

2. Plot no. 78
EPIP phase 1
Jharmajri, baddi
Solan HP-174103
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3. Plot no. 154, 158, &160

Kunai industrial estate,
Goa-403115.
Board of Directors:
Chairman

D.

Vice-Chairman

R. A.

Deputy Chairman

P. K.

Samuel

Shah

Ghosh
Managing Director

M. V.

Deoras
Whole-time Director
Whole-time Director

M. A. Elias

K. V.

Vaidyanathan

J. K. Setna
V. S. Mehta

Company Secretary:

K. V. Vaidyanathan

Management Committee:
Managing Director M. V. Deoras
Financ e
Legal

M. A. Elias
K. V.

Vaidyanathan
Marketing

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R. Krishnamurthy

Shareholders/Investors Grievance Committee Chairperson:

P. K. Ghosh

M. V. Deoras

J. K. Setna

K. V. Vaidyanathan

Auditors:
Price Waterhouse
Chartered Accountants

Registrars & Share Transfer Agents:

Sharepro Services (India)
Private Limited

Report of the Directors

To
The Members
Colgate-Palmolive (India) Limited
Your Directors have pleasure in presenting their Report and
Audited Accounts of the Company for the year ended March 31,
2010.

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International Expansion
Colgate & Company had been a pioneer in establishing
international operations, creating a Canadian subsidiary in 1913
and one in France in 1920. In the early 1920s the firm expanded
into Australia, the United Kingdom, Germany, and Mexico.
Colgate or its successor firm next created subsidiaries in the
Philippines, Brazil, Argentina, and South Africa in the late 1920s.
In 1937 the company moved into India and by the end of the 1940s
had operations in most of South America. By 1939 ColgatePalmolive-Peet's sales hit $100 million.
In the 1940s and 1950s the company also built upon its strategy of
growth by acquisition, buying up a number of smaller consumer
product companies. Organic growth remained on the agenda as
well, and in 1947 the company introduced two of its best-known
products, Fab detergent and Ajax cleanser. These acquisitions and
new products, however, did little to close the gap between Colgate
and its arch-rival, the Procter & Gamble Company, a firm that had
been formed in the 1830s and had by now assumed a commanding
lead over Colgate in selling detergent products in the United States.
Meanwhile, the firm adopted its present name in 1953 and moved
its offices for domestic and international operations to New York
City in 1956.
In 1960 George H. lest was appointed Colgate's president in the
hopes that his international experience would produce similar
success in the domestic market. Under his leadership, the company
embarked upon an extensive new product development program
that created such brands as Cold Power laundry detergent,
Palmolive dishwashing liquid, and Ultra Bite toothpaste. In an
attempt to expand beyond these traditional, highly competitive
businesses into new growth areas, Colgate also successfully
introduced a new food wrap called Baggies in 1963. As a result of
these product launches, the company's sales grew between 8 and 9
percent every year throughout the 1960s. Sales topped the $1
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billion mark in 1967.

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

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Company overview: Colgate Palmolive (India) ltd.

Colgate-Palmolive is Rs1, 300 crore company started in year
1937.In Rs2, 400 crore domestic market it enjoys 50% of market
share. It spread across 4.5 million retails outlets out of which 1.5
million are direct outlets.
The Company is having four wholly owned subsidiaries
namely Colgate-Palmolive (Nepal), Multimint Leasing & Finance
and Jigs Investments and Passion Trading & Investment Company.
In November 2007, it acquired a 75% equity interest in
Advanced Oral Care Products, Professional Oral Care Products
and SS Oral Hygiene Products, the company is the fastest growing
and one of the oldest companies catering to the personal care
products.The company is regularly coming up with new products
and has been a consintent financial performer.
Products
Oral care-Under this segment the company offers product like
toothpastes, toothbrush, tooth powder & tooth whitening products.
Personal care -In this segment it offer products skin care, hair care,
body wash, & shaving creams
Household care-Under this segment it has launched brand AXIOM-a
dish washing paste.
It has also introduced new products namely Colgate dental floss,
ORAGARD-B a mouth ulcer cream etc.
Milestone
In 2003 Colgate was ranked as Indias Most Trusted Brand across all
categories by Brand Equitys Most Trusted Brand Survey for four
consecutive years from 2003 to 2007.

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

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DIRECTORS REPORT
Financial Results
(Rs. Crore)
2009-10 2008-09
Total Revenue
Sales(Excluding Excise Duty)
Other Income
Profit before Taxation
Provision for Taxation
Profit after Taxation
Balance brought forward
Profit
available
for
appropriation
Appropriation
Dividend
Dividend Tax
General Tax
Balance carried forward

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2,060.92
1,962.46
98.46
484.80
61.54
423.26
28.84
452.10
271.98
45.84
42.33
91.45
452.10

1,802.57
1,694.81
107.76
345.31
55.09
290.22
5.77
295.99
203.99
34.14
29.02
28.84
295.99

BUSINESS PERFORMANCE
Your Companys strong performance continued in 2009-10
despite difficult economic conditions. In a year marked by volatile
financial and growth during the year 2009-10. Sales for the year
increased by 16 per cent at Rs. 1,962 crore during the previous
year. The toothpaste business registered an impressive volume
growth of 14 per cent during the year.
The profit after tax for the financial year 2009-10 grew by an
impressive 46 per cent to Rs. 423 crore as against Rs. 290 rore in
the previous year.
The underlying performance can be gauged from the following
ratios:
2009-10
2008-09
Eamings per share (Rs.)
31.1
21.3
currency markets. Your Company achieved a healthy double
digit Sales
Dividend per share (Rs.)
20.0
15.0
Return on Capital Employed (%)
156.9
155.0
During the year generation continued to be very strong arising
from significant improvements in the business performance,
efficiencies and cost saving across the organization and a
continued efficient collection system. Your Company managed
investments prudently by deployment of surplus funds after
ensuring that such investments satisfy the Companys criteria of
safety and liquidity.
Your Companys market shares are improving steadily. These
it creases are driven by our strong focus on understanding our
consumers, working with our retail customers. Your Company also
continued to focus on driving innovation throughout all areas of
business, increasing effectiveness and efficiency everywhere and
strengthening the leadership competency of the team. The sharp
focus on these four clearly defined strategy initiative, helped your
Company continue to maintain its leadership position in the oral
care market.
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Your Company is positioned well for the future on account of its

financial strength, market leadership position, a proven business
strategy that has helped your Company succeed in strong and weak
economic environment team of people working together to achieve
the Companys business goals.

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1. Dividend
The Companys strong cash generation and positive
growth momentum led your Board to declare three interim
dividends of Rs. 7 and Rs. 5 per share aggregating Rs.20 per share
for the financial year 2009-10 as against Rs.15 per share in the
previous year-a 33 per cent increase. These dividends were paid on
September 4 and December 28, 2009 and April 23,2010. Having
declared three interim dividends, your Board has not recommended
a final dividend for the financial year 2009-10.

2. Responsibility Statement
Pursuant to Section 217(2AA) of the Companies Act, 1956 the
Directors based on the representations received from the Operating
Management confirm:
a) That in the preparation of the annual accounts,
the applicable accounting standards have been
followed and that no material departures have
been made from the same,
b)That they in selection of the accounting policies
consulted the statutory auditors and have
applied them consistently and made judgments
and estimates that are reasonable and p....... so
as to give a true and fair view of the state of
affairs of the Company at the end of the financial
year and of the profit of the Company for that
period,
c) That to the best of their knowledge and
information. They have taken proper and
sufficient care for the maintenance of adequate
accounting records in accordance with the
provisions of the Companies Act.1956 for
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safeguarding the assets of the Company and for

prevented and detecting fraud and other
irregularities .
d)That they have prepared the annual accounts on
a going concern basis.

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

4. Corporate Social Responsibility

Your Company in partnership with the Indian Dental Association
(ADI) successfully concluded the 6 edition of a two month long Oral
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Health Month Program during the year covering a wide spectrum of

activities designed to spread oral health awareness and good oral hygiene
practices. The mission of Program continued to be Zero Tooth Decay

involving 17,500 dental professionals pread across 1,000 towns.

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

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5. Corporate Governance
A separate report on Corporate Governance along with the
Auditors certificate on its compliance is attached as Annexure 1 to
this Report.

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

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

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8. Energy, Technology Absorption and Foreign Exchange

The information required under Section 217(1)(e) of the
Companies Act, 1956 read with the Companies (Disclosure of
Particulars in the Report of the Directors) Rules, 1988 with respect
to conservation of energy, technology absorption and foreign
exchange earnings/ outgo is appended hereto as Annexure 2 and
forms part of this Report.

9. Directors
Effective February 1, 2010 Mr. Mukul Deoras was
appointed as the Managing Director of the Company to succeed
Mr. Roger Calmeyer, who stepped down as the Managing Director
of the Company effective January 31, 2010 to retire from the
services of the Corporation. The appointment of Mr. Deoras is
subject to the approval of the shareholders and the Central
Government under the provisions of the Companies Act, 1956.
The Board places on record their appreciation for the
distinguished services rendered by Mr. Calmeyer during his tenure
with the Company.
Effective April 1, 2010 Mr. Derrick Samuel has been appointed as
Director and Chairman of the Board to succeed Mr. Justin skala,
who has stepped down to head the Latin America Division of the
Corporation. The Board, while welcoming Mr. Samuel, places on
record their appreciation for the distinguished services rendered by
Mr. Skala during his tenure with the Company.
Under Article 124 of the Companys Articles of
Association, Mr. P.k. Ghosh and Mr. M.A. Elias retire by rotation
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at the 69th Annual General Meeting and, Being eligible, offer

themselves for re-appointment.

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

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

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To the Members of Colgate-Palmolive (India) Limited.

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1. We have audited the attached Balance Sheet of ColgatePalmolive ( India) Limited ( the Company) as at March 31,2010
and related Profit and Loss Account and Cash Flow Statement for
the year ended on that date annexed thereto, which we have signed
under reference to this report . These financial statements are the
responsibility of the Companys Management. Our responsibility is
to express an opinion on these financial statements based on our
audit.
2. We conducted our audit in accordance with the auditing
standards generally accepted in India. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amount and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by Management. as well as evaluating the overall
financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
3. As required by the companies (Auditors Report) Order, 2003.
As amended by the companies (Auditors Report) (Amendment)
Order, 2004 (together the Order). Issued by the Central
Government of India in terms of sub section (4A) of Section 227
of the Companies Act, 1956 of India (the Act) and on the basis
of such checks of the books and records of the Company as we
considered appropriate and according to the information and
explanations given to us, we give in the Annexure a statement on
the matters specified in paragraphs 4 and 5 of the Order.
4.

Further to our comments in the Annexure referred to in

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paragraph 3 above, we report that:

(a) We have obtained all the information and explanations which,
to the best of our knowledge and belief, were necessary for the
purposes of our audit;
(b) In our opinion proper books of account as required by law have
been kept by the company so far as appears from our examination
of those books;
(c) The Balance Sheet, Profit and Loss Account and Cash Flow
statement dealt with by this report comply with the accounting
standards referred to in sub section (3C) of Section 211 of the
Act;
(e) On the basis of written representations received from the
directors, as on March 31, 2010 and taken on record by the Board
of Directors, none of the directors is disqualified as on March 31,
2010 from being appointed as a director in terms of clause (g) of
sub section (1) of Section 274 of the Act;
(f) In our opinion and to the best of our information and
explanations given to us, the said financial statements together
with the notes thereon and attached thereto give, in the prescribed
manner, the information required by the Act, and give a true and
fair view in conformity with the accounting principles generally
accepted in India:
(i)

in the case of the Balance Sheet, of the state of affairs of

the
Company as at March 31, 2010;
(ii)
in the case of the Profit and Loss Account of the Profit
for the
Year ended on that date; and
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(iii) In the case of the Cash Flow statement, of the cash flows
for the year
ended on that date
For price Waterhouse
Firm Registration No.301112E
Chartered Accountant
Partha Ghosh
Partner

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Meaning Of Ratio Analysis:

One of the most importance methods of analysis of
financial statement is Ratio Analysis. Ratio Analysis is a in
numerical figure which is used to find out relationship between
different statements. Single statement carries no meaning.
Example : If the profits of company A are Rs, 100000 and
company B are Rs. 150000 and if one is asked which company is
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doing better, naturally the answer would be company B. But it is

an incomplete answer unless and until the figures of profits are
related with either the volume of capital employed or sales. It
carries no message. Therefore if sales for company A is Rs. 200000
and for company B Rs. 450000 then the result would be as follows.
Ratio analysis is a widely used tool of financial
analysis. The relation between two accounting figures,
expressed mathematically, is known as Financial Ratio. In
financial analysis, a ratio is used as a benchmark for
evaluating the financial position and performance of a firm.
From the ratio analysis one can get further insight about
financial strength and weaknesses of the firm. Management,
creditors, investors and others calculate the ratio to form
judgment about the operating performance and financial
position of the firm.
The absolute accounting figures reported in the
financial statement do not provide a meaningful
understanding of the performance and financial position of a
firm. An accounting figure conveys the meaning when it is
related to some other relevant information.

Advantage of Ratio Analysis:There are various

groups of people who are interested in analysis of financial
position of a company. They use the ratio analysis to find out a
particular financial characteristic of the company in which they are
interested. Ratio analysis helps the various groups in the following
manner:
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1)

To Find out profitability :

Accounting ratio helps to

calculate the profitability of business by calculating the various
profitability ratios. It helps the management to know about the
earning capacity of the firm. In this way profitability ratio show the
actual performance of the business.
2)

To Find out the solvency :

With the help of solvency ratios,

solvency of the company can be calculated. These ratios show the
relationship between the liabilities and the assets.

3)

Helpful in analysis of financial statement :

Ratio analysis
helpful the outsider like creditor, share holder, debenture holder,
bankers to know about the profitability and ability of the firm to
pay them interest, dividend, etc.

4)

Helpful in comparative analysis of the performance :

With
the help of ratio analysis, the company may have comparative
study of its performance to the previous years. In this way
company comes to know about its weak point and able to improve
them.

5)

To simplify the accounting information :

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Accounting
ratios are very useful as they briefly summaries the result of detail
and complicated calculation.
6)

To know about the efficiency :

The ratio analysis helps to

know the operating efficiency of the company with the help of
various turnover ratios. All turnover ratios are calculated to
evaluate the performance of the business in utilizing the resource.
7)

To know about the liquidity position :

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

8)

Helpful for forecasting purpose :

Accounting ratio indicates

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

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Disadvantage of ratio analysis:

In spite of many advantage there are many limitation of
ratio analysis techniques and they should be kept in mind while
using them in interpreting financial statement. The following are
the limitations of accounting ratio.
1)

FALES RESULT:

Accounting ratios are bases on data taken

from books of accounting. In case that data is incorrect then only
the ratios will be incorrect. The data therefore must be absolutely
correct.
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2)

LIMITED COMPAREBILIYT:

Difference firm
apply difference accounting policy. Therefore the ratio of one firm
can not always be compared with the ratio of other firm. Some
firm may value the closing stock on first into bases while some
other firm similarly there may be difference in providing
deprecation on fixed assets on certain provision also.
3)

AFFECT PRICE LEVEL CHANGES:

The
prize level changes often make the comparison difficult over a
period of time. Changes in prize affect the cost of production, sales
and also the value of assets. Therefore it is necessary to make
proper adjustment for prize level changes before any comparison.
4)

QUALITATIVE FACTOR ARE IGNORED:

Ratio
analysis is technique of quantitative analysis and thus ignores
qualitative factors which may be important in decision making.
E.G.: Average collection period may be equal to standard credit
period but some debtors may be in the list of doubtful debt, which
is not disclosed while, ratio analysis.

5)

EFFECT OF WINDOW DRESSING:

In order to cover-up
their bed financial position. Some companies use window dressing.
The main record the accounting data according to the conventions
to show the financial position of the company in a better way
costly teach.
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6)

COSTLY TECHNIQUE:

Ratio analysis is a costly

technique in business houses. Small business units are not able to
effort it.
7)

ABSENCE OF DATA:
In the absence of absolute data, the result may be
misaligning. E.G: the gross profit of two firms is 25% where the
profit earned by one firm is just Rs: 5000 & sales are Rs: 20000.
Profit earned by other firm is Rs: 10, 00,000 and sales Rs: 40,
00,000 even the profit of the firm is same but the magnitude of
their business is guide different.
8)

ABSENCE
OF STANDERED UNIVERSITY
ACCEPTED TERMINOLOGY:
There are no standard ratios, which are
universally accepted for cooperation purpose. As, such the
significance of ratio analysis techniques is reduce.

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Classification of ratio:

1.
2.
3.
4.
5.

Liquidity Ratio
Profitability Ratio
Leverage Ratio
Activity or Efficiency Ratio
Coverage Ratio

1.

Liquid Ratio

a.
b.

Current Ratio
Liquid Ratio

2.

Profitability Ratio

A.
a.
b.

In Relation To Sales
Gross Profit Ratio
Net Profit Ratio

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c.
d.

Operating Ratio
Expenses Ratio

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B.

In Relation To Investment

a.
b.

Return on Capital Employed

Return on Share holders Fund

C.

In Relation To Equity Share holders

a.
b.
c.
d.

Earning Per Share

Dividend Per Share
Price Earnings
Return on Equity Share holders Fund

3.

Leverage Ratio

a.
b.
c.
d.

Debt Equity Ratio

Proprietary Ratio
Gearing Ratio
Long Term Fund To Fixed Assets Ratio

4. Activity or efficiency Ratio

a.
b.
c.
d.
e.
f.

Stock turnover Ratio

Working Capital Turnover
Debtors Ratio
Creditors Ratio
Total Assets Turnover Ratio
Book Value Per Share

5. Coverage Ratio
a.
b.

Debt Services Coverage Ratio

Interest Coverage

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1. GROSS PROFIT Ratio

Meaning:
This ratio shows the relationship between gross profit & net sales.
Objective:
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The main objective of computing this ratio is to find out the

efficiency with which production or purchase operation are carried on.
Components:
There are two components of this ratio which are as under:
1. Gross Profit Which is the access of net sales over cost of goods sold.
I.e. Net Sales Cost Of Goods Sold = Gross Profit
Cost of goods sold = Opening stock
+ Net purchases (purchase purchase
expenses)
+ Direct expenses
Closing stock
2. Net Sales Which means gross sales Sales return
Calculation:
This ratio is calculated by dividing the gross profit by net
sales. It is expressed as percentage.

(in lacs)
Calculation: Year
Gross profit
Net sales
Gross profit ratio
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2007-08
84060.25
147337.90
57.05%

2008-09
95350.59
169481.35
56.26%

2009-10
118561.63
196245.92
60.41%

Interpretation: Here gross profit ratio decreased in 2008-09.which shows efficient use
of raw material and there is decrease in manufacturing expenses. It means
that a low ratio suggests that the firm is not able to buy at reasonable prices
or that the cost of production is not under control. The firm has to work
better for it and reduce its cost of production.

This ratio indicates

A. An average gross margin earned on a self of RS.100
B. The limit beyond which the fall in selling prise definitely result in losses.
C. What portion of sales is to cover operating expenses (Other than the
COGS) and non operating expenses. Higher the ratio, the more efficient
in production and purchase management. This ratio may increase due to
one of the following factor:
1. Higher selling prise with constant cost of goods sold.
2. Lower cost of goods sold with constant selling price.
3. A combination of above two factors.
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2. NET PROFIT RATIO :

Meaning:
This ratio measures the relationship between net profit & net
sales.
Objective:
The main objective of computing this ratio is to determind the
overall profitability due to various factors such as operational efficiency,
trading on equity etc.
Components:
There are two components of this ratio which are as under:
1. Net Profit
2. Net Sales
Calculation:
This ratio is calculated by dividing the net profit by net sales.
It is expressed as percentage. In the form of a formula this ratio may be
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expressed as under:

(in laces)
Calculation: Year
Net profit
Net sales
Net profit ratio

2007-08
23171.02
147337.90
15.73%

2008-09
29021.94
169481.35
17.12%

2009-10
42325.82
196245.92
21.57%

Interpretation: Here in the three years the net profit ratio of the company shows
downward trend. It shows profitability of firm and management of the firm
is not efficient this suggest that company is not satisfactory position and can
be harmful for the company.
This ratio indicates
A. An average net margin earned on a sale of Rs.100.
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B. What portion of sales is left to pay dividing & to create reserves.

C. Firms capacity to face adverse economic condition when selling price
declining, cost of production is increasing & demand for the product is
decreasing.
Higher the ratio greater is the capacity of the firm to face adverse
economic condition and vice-versa.

3. Return

on Capital Employee :

Meaning:
This ratio measures a relationship between net profit before
interest & tax and capital employed.
Objective:
The objective of calculating this ratio is to find out how
efficiently the long term fund supplied by the creditors & shareholders has
been used.
Components:
There are two Components of this ratio which are as under:

1. Net Profit Before Interest & Tax

2. Capital Employed Which Refers to long term fund supplied by
the long term creditors & shareholders. It comprises the long
term debts & shareholders fund.
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Calculation:
This ratio is calculated by dividing the net profit before
interest & tax by capital employed. This is expressed as percentage. In the
form of a formula this ratio may be expressed as under:

Calculation of Capital Employed = Equity Share Capital

+ Preference Share Capital
+ Reserves & Surplus
+ Profit & Loss A/C Credit balance
+ Long term debt
Fictitious Assets.

(in lacs)

Year
Net profit(BIT)
Cap employed
Returns

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2007-08
29204.91
16220.62
180.05%

2008-09
34530.65
21629.57
159.65%

2009-10
48479.85
32611.16
148.66%

Interpretation:
This ratio indicates the ability of the firm to generate profit per rupee
on capital employed. Higher the ratio the more efficient the management &
utilization of capital employed.

4.

Return on Shareholders Fund :

Meaning:
The ratio measures the relationship between net profit after
interest, tax & shareholders fund.
Objective:
The objective of computing this ratio is to find out how
efficiently the fund invested by the shareholders has been used.
Components:
There are two components of this ratio as under:
1. Net Profit after Interest & Tax (PAT)
2. Shareholders Fund which mean
Equity share capital
+ Preference share capital
+ Reserves & surplus
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+ P&L A/c credit balance

Fictitious assets.
Calculation:
This ratio is calculated by dividing the net profit after interest
and tax by shareholders fund. It is expressed as percentage. In the form of a
formula this ratio may be expressed as under:

(in lacs)
Year
Net profit(PAT)
Shareholders fund
Returns

2007-08
23171.02
16220.62
142.85%

2008-09
29021.94
21629.57
134.18%

2009-10
42325.82
32611.16
129.79%

Interpretation:
This ratio indicates the firms ability to generating profit per
rupee of shareholders fund. Higher the ratio the more efficient funds.
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5. Return

on EquitShareholders

Fund :
Meaning:
This ratio measures a relationship between net profit after interest,
tax and preference dividend and equity shareholders funds.
Objective:
The objective of computing this ratio is to find out how efficiently
the funds supplied by the equity shareholders have been used.
Components:
There are two components of this ratio they are as under:
1. Net Profit after Interest, Tax & Preference dividend
2. Equity Shareholders Fund which means
Equity Share Capital
+ Reserves & Surplus
+ P&L A/c Credit Balance
Fictitious Assets
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Calculation:
This ratio is calculated by dividing the net profit after interest
& tax and preference dividend by equity shareholders fund. It is expressed
as percentage. In the form of a formula this ratio may be expressed as under:

(in lacs)
Calculation:
Year
Net profit(PAT)
Eq. Shareholders fund
Returns

2007-08
23171.02
16220.62
142.85%

2008-09
29021.94
21629.57
134.18%

2009-10
42325.82
32611.16
129.79%

Interpretation:
Return on equity share holder fund was 36.55%in 2006-07
which increased 40.41% and again decreased to 33.11% it indicates that
fund which is provided by the owners have been not used properly by the
firm which can be unsatisfactory for the company in the future.
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This ratio indicates the firms ability of generating profit per

rupee of equity shareholders fund. Higher the ratio the more efficient the &
proper utilization of equity shareholders fund.

6. Operating

Ratio :

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

Objective:
The main objective of computing this ratio is to determined the
operational efficiency with which production or purchase & selling
operations are carried on.
Components:
There are two components of this ratio which are as under:
1. Operating cost consisting two element
A. Cost of Goods Sold
B. Other Operating expenses
Ex. Administrative expenses, selling & distribution expenses,
interest on short term loans, discount allowed and bed debts,
net sales (Gross Sales Sales Return)
2. Net Sales
Calculation:
This ratio is calculated by dividing the operating cost by net
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sales. This ratio is expressed as percentage. In the form of a formula this

ratio may be expressed as under:

(in lacs)

Year

2007-08

2008-09

2009-10

COGS

63277.65

74130.76

77684.29

Operating exp

33152.65

36313.73

40310.73

Net sales

147337.90

169481.35

196245.92

Operating ratio

65.45%

65.17%

60.13%

Interpretation:
This ratio indicates an average operating cost incurred on sales of
goods worth Rs. 100. Lower the ratio, greater is the operating profit to cover
the operating expense to pay dividend and to create reserves & vice-versa.
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7. Expenses

Ratio:

Meaning:
This ratio measures the relationship between different types of
ratio with expenses & net sales.
Objective:
The main objective of computing different types of expenses
ratio is the efficiency or otherwise the incurrence of different types of
expenses.
Components:
There are two components of this ratio which are as under:
1. Different type of expenses
2. Net Sales
Calculation:
This ratio is calculated by dividing different types of expenses
by the net sales. This ratio is expressed as a percentage. In the form of a
formula this ratio may be expressed as under:

Interpretation:
This ratio indicates an average expenses incurred on sales of goods
worth Rs.100. Lower the ratio, greater is the operating profit to cover
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operating expenses, to pay dividend and to create reserves & surplus & viceversa

8. EARNING

PER SHARE Ratio

Meaning:
This ratio measures the earnings available to an equity
shareholder on a per share basis.
Objective:
The objective of calculative this ratio is to find out the
profitability of the firm on per equity share basis.
Components:
There are two components of this ratio which are as under:
1. Net Profit after Interest, Tax & Preference dividend
2. No. of equity Shares
Calculation:
This ratio is calculated by regarding the net profit after
interest, tax and preference dividend by the no. of equity shares. It is
expressed as absolute figure. In the form of a formula this ratio may be
expressed as under:

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(in lacs)

Year
NP-pref. share
No. of eq. share
Earning per share (Rs.)

2007-08
23171.02
1359.93
17.04

2008-09
29021.94
1359.93
21.34

2009-10
42325.82
1359.93
31.12

Interpretation:
In general, higher the ratio the better it is and vice-versa.
While interpreting this ratio, it must be seen whether there is any increase in
equity shareholders fund as a result of retained earning without any change
in no. of outstanding shares.

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9. DIVIDEND

PER SHARE

Meaning:
This ratio measures relationship between dividend and no. of
equity shares.
Objective:
The objective of calculating this ratio is to find out net
distributed profit after interest, tax and preference dividend to equity
shareholders.
Components:
There are two components of this ratio which are as under:
1. Dividend paid to equity shareholders
2. No. of equity shares
Calculation:
This ratio is calculated by dividing dividend paid to equity
shareholders by no. of equity shares. It is expressed as absolute figure. In the
form of a formula this ratio can be expressed as under:

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(in lacs)
Year
Total dividend declared
No. of share
Dividend per share (Rs.)

2007-08
17679.07
1359.93
13

2008-09
20398.92
1359.93
15

2009-10
27198.57
1359.93
20

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

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10.

PRICE EARNING RATIO

Meaning:
This ratio measures relationship between market value of equity
shares & earning per share.
Objective:
The objective of computing this ratio is to find out expected
return on investment in equity shares.
Components:
There are two components of this ratio which are as under:
1. Market price per equity share
2. Earnings per share
Calculation:
This ratio is calculated by dividing market price per equity
share by earning per share. It is expressed has an absolute this figure. In the
form of a formula this ratio may be expressed as under:

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(in lacs)
Year
Market price
Earning per share
Price earning ratio (P/E Ratio)

2007-08
10
17.04
0.59

2008-09
10
21.34
0.47

2009-10
10
31.12
0.32

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

which earning are capitalize by the stock market seniti mated. Higher the
ratio, better it is show the extent to when market value of the equity share
has increased further its helps the management in planning the limit of the
equity capital issue

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11. CURRENT RATIO

Meaning:
This ratio establishes a relationship between current assets &
current liabilities.
Objective:
The objective of computing this ratio is to find the ability of the
firm to meet its short term obligation.
Components:
There are two components of this ratio which are as under:
1. Current Assets:
9 Current Assets which mean the assets which can be
converted in too cash within the period of a year & include the following:
Cash balance, Marketable securities, Bills Receivables , Prepaid expenses,
advanced payment of tax, Bank balance, Debtors, Stock of all types i.e. rawmaterials, work in progress, Finished goods, Incomes due but not received.
Important Note:
The provision for bad debts or doubtful debts is deducted
for the total amount of debtors.
2. Current Liabilities:
A current liability which means that liabilities which
are expected to be matured within a year and include the following.
Creditors, Bills payable, short term loans & advances, Provision for
taxation, Bank overdraft, and income received in advances, unclaimed
dividend etc.

Calculation:
This ratio is calculated by dividing the current assets by current
liabilities. This ratio is usually express as under.
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(in lacs)

Year
Current Assets
Current Liabilities
Current Ratio

2007-08
40168.55
53420.09
0.75 : 1

2008-09
54210.29
55573.32
0.97 : 1

2009-10
59013.45
55147.30
1.07 : 1

Interpretation: Current ratio of the firm has remained all most constant around as it has kept
constant trend. The company has satisfactory current assets for its future
need. Current assets are more than current liabilities. It means company can
utilized properly current assets. The ideal ratio is 2:1

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

12. LIQUID RATIO (QUICK RATIO/ACID

TEST RATIO)
Meaning:
This ratio establishes the relationship between quick assets and
liquid liabilities.
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Objective:
The objective of calculating this ratio is to find out the ability of
the firm to meet its short term obligations as and when due without relying
upon the realization of stock.
Components:
There are two components of this ratio which are as under:
1. Quick assets/Liquid assets:
Which means those assets which can be
converted into cash immediately an include the following
Cash balance, Marketable securities, Bills receivable, Bank balance,
Debtors, Short term loan and advances or
Quick Assets =Current Assets Stocks
2. Liquid Liabilities which include all current excepted bank over
draft i.e.
Liquid Liabilities = Current liabilities Bank over Draft
Calculation:
This ratio is calculated by dividing by the liquid assets by
liquid liabilities. This ratio is usually express as a pure ratio.

(in lacs)

Calculation: Year
Liquid assets
Liquid liabilities
Liquid ratio
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2007-08
32604.7
34693.43
0.94:1

2008-09
45967.96
39454.14
1.17:1

2008-09
47958.09
42665.43
1.12:1

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

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Introduction:
This ratio measures the effectiveness with which a firm uses
its available resources. These ratios are also called turnover ratios since they
indicate the speed with which the resources are converted in to sales.
Usually the following activity ratios are calculated.
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1.
2.
3.
4.
5.
6.

Stock Turnover Ratio

Working Capital Turnover Ratio
Total Assets Turnover Ratio
Debtors Ratio
Creditors Ratio
Book Value per Share Ratio

13. STOCK TURNOVER RATIO

Meaning:
This ratio measures the overall turnover of stock for a particular
period of time.
Objective:
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The objective of calculating this ratio is to find out the

relationship between cost of goods sold and average inventory.
Components:
There are two components of this ratio they are as under:
1. Cost of Goods Sold which is calculated as under
Opening stock
+ Net purchases
+ Direct expenses
Closing stock
Or
COGS = Net Sales Gross Profit
2. Average Inventory or Average Stock

Calculation:
This ratio is calculated by dividing the cost of goods sold by
average stock. This ratio is usually expressed as number of times. In the
formula this ratio may be express as under.

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(in lacs)

Calculation: Year
Cost of goods sold
Average Stock
Stock turnover ratio (times)

2007-08
63277.65
3549.275
17.83

2008-09
74130.76
3884.525
19.08

2009-10
77684.29
4546.54
17.09

Interpretation:
This ratio indicates the speed with which inventory is converted in to
sales. A high ratio indicates efficient performance. In the other hand a too
low ratio may be the result of excessive inventory. To judge whether the
ratio is satisfactory or not, it should be compared with its own past ratio.

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14. Working Capital Turn

Over Ratio
Meaning:
This ratio establishes a relationship between net sales & working
capital.
Objective:
The objective of computing this ratio is to determine the
efficiency in which the working capital is utilized.
Components:
There are two components of this ratio which are as
under:
1. Net Sales
2. Working Capital which means
Current Assets Current Liabilities
Calculation:
This ratio is calculated by dividing the net sales by the
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working capital. This ratio is usually expressed as no. of times. In the form
of a formula this ratio may be expressed as under.

(in lacs)
Year
Net sales
Working capital
WCT

2007-08
147337.90
13251.54
11.12

2008-09
169481.35
1363.03
124.34

2008-10
196245.92
3866.15
50.75

Interpretation:
This ratio indicates the firms ability to generate sales per
rupee of working capital. In general, higher the ratio, the more efficient the
management & utilization of working capital and vice-versa. In the year
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2008
Firms WC is @ lover level. The level was increase in 2009 @ a pick to 124
Reached down in 2010 @50

15. Total Asset Turnover Ratio

Meaning:
This ratio measures the overall performance or activity of the
business enterprise.
Objective:
The objective of calculating this ratio is to find out the efficiency
or inefficiency in the use of total assets.
Components:
There are two components of this ratio which
1. Net Sales
2. Total Assets
Calculation:
This ratio is calculated by dividing net sales by total assets.
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(in lacs)
Year
2007-08
SALES
147337.30
Total assets
16689.37
Total assets turnover

2008-09
169481.35
22098.32

2009-10
196245.92
33069.91

ratio

7.67

5.93

8.83

Interpretation:
An ideal total assets turnover ratio is 2:1 i.e. Amount of
sales are double than total assets. A lower ratio than the ideal ratio shows
that the assets are not utilized properly. Here in the firms asset turn over
Ratio is decreasing per year. In 2007 its a8.83 than decrease in current year
Is 5.93i.e. 2%
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16. Debtors Ratio

Meaning:
This ratio establishes a relationship between debtors and bills
receivables with average daily credit sales.
Objective:
The objectives of computing this ratio is to find out the
efficiency which the trade debtors are managed.

Components:
There are two components of this ratio. They are as under
1. Debtors and Bills receivable
2. Net Credit Sales
Calculation:
This ratio is calculated by dividing debtors and bills
receivables by net credit sales. This ratio is usually expressed as no. of days.

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(in lacs)

Year
Debtors + B\R
Credit sales
Debtors ratio

2007-08
918.55
147337.90
2.28days

2008-09
1113.45
169481.35
2.40 days

2009-10
976.88
196245.92
1.87days

Interpretation:
This ratio shows average collection period for credit sales.
In other words it can be said that the time period given to debtors to pay
their payments can be known by this ratio. This ratio is also known as
Debtors velocity.
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17. Book Value Per Share

Meaning:
This ratio establishes relationship between equity share capital &
reserves and surplus with no. of shares.

Objective:
The objective of computing this ratio is to find out the proportion of
share capital & reserves & surplus with no. of equity shares.

Components:
There are two components of this ratio
1. Equity share capital & reserves and surplus
2. No. of equity shares

Calculation:
This ratio is computed by dividing equity share capital & reserves &
surplus by no. of equity shares. It is expressed as an absolute figure.

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Book Value per Share Ratio =

(in lacs)
Year
Eq. shares
Reserves & surplus
No. of eq shares
Book value per share

2007-08
1359.93
14860.69
1359.93
11.93

2008-09
95.92
832.58
95.92
9.68:1

2009-10
95.92
998.55
95.92
11.4:1

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

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18. CREDITORS RATIO

Meaning:
This ratio establishes a relationship between creditors and bills
payable and average daily credit purchases.
Objective:
The objective of computing this ratio is to determine the efficiency
with which creditors are managed.
Components:
There are two components of this ratio
1. Creditors and Bills Payable
2. Net Credit Purchases
Calculation:
This ratio is calculated by dividing the creditors and Bills Payables by
Net credit purchases. This ratio is usually expressed as X no. of times (days).
Formula: -

Creditors ratio = Creditors + bills payable

Credit purchase
(in lacs)
Calculation: Year
Creditors
Average daily purchase
Creditors ratio (days)

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2007-08
267.33
1374.94
71

2008-09
375.73
1593.65
86

2009-10
375.5
2119.93
62

Interpretation: This ratio of the firm has decreased in 2 years from 71 in 2006-07
to 62 in 2008-09. It shows the bad position of the company and company
cannot collect debt easily which can be a loss to the firm.
This ratio shows an average time period for which the credit purchase
remain outstanding or the average credit period allowed by the creditors.
This ratio is also known as Debt Payment period or Creditors Velocity

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19. Capital Structure Ratio (Capital Gearing Ratio)

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Meaning:
Capital structure of a company consist of a verity of securities
Ex. Equity share & preference share which satisfy its share capital
requirements while by other securities such as debentures, warrants etc. the
company satisfies its access requirement of long term capital & borrowed
capital, leverage ratios are calculated. Sum of the leverage ratios are as
under.
1. Debt equity ratio
2. Proprietary ratio
3. Capital Gearing ratio
4. Long term funds to fixed assets ratio

20. Debt Equity Ratio

Meaning:
This ratio establishes a relationship between long term debts &
shareholders funds.
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Objective:
The objective of computing this ratio is to find out the relative
proportion of debt & equity in financing the assets of a firm.
Components:
There are two components of this ratio which are as under:
1. Long term debt which means all types of secured and unsecured
loans.
Ex. Debtors, Loans from financial institution
2. Shareholders funds which means equity share capital + Preference
share capital + Reserves & surplus Fictitious Assets
Calculation:
This ratio is calculated by dividing the long term debts of the firm by
shareholders fund. This ratio is usually expressed as a pure ratio.
Ex. 2:1

Debt Equity Ratio =

Calculation:
(in lacs)
Year
Long term debt
Share holders fund
Debt eq ratio

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2007-08
468.75
16220.65
.029:1

2008-09
468.75
21629.57
.022:1

2009-10
468.75
32611.16
.014:1

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

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21. PROPRIETORS RATIO

Meaning:
This ratio measures the relationship between shareholders funds &
total assets of the company.
Objective:
The objective of calculating this ratio is to find out how efficiency the
properties have utilized the funds for purchasing the assets.
Components:
There are two components of this ratio which are as under:
1. Shareholders funds or proprietors fund
2. Total assets or total liabilities
Calculation:
This ratio is computed by dividing shareholders fund by total assets.
In the form of a formula their ratio may be expressed as under:
Formula: -

Proprietors ratio = Shareholders fund * 100

Total asset/liability
(in lacs)
Calculation: Year
Proprietary fund
Net assets
Proprietary ratio

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2007-08
16220.62
16689.37
97.19%

2008-09
21629.57
22098.32
97.88%

2009-10
32611.16
33669.91
98.61%

Interpretation: Proprietary ratio shows 2007-08 an upward move and after in year
2008-09 also towards a top. Ratio was @ pick in2010@98.61%. Then firm
has a strong owners fund than the assets of the firm

83 | P a g e

22. LONG TERM FUND TO FIXED ASSET RATIO

Meaning:
This ratio measures a relationship between long term funds to fixed
assets.
Objective:
With the help of this ratio one can move how efficiently the long term
funds have been invested in fixed assets.
Components:
There are two components of this ratio which are as under:
1. Shareholders funds + Long term debts
2. Fixed assets
Calculation:
This ratio is calculated by dividing shareholders funds & long term
debts by fixed assets. It is expressed as pure ratio.
Formula:

Long Term Funds to

Fixed Assets Ratio =
Here, Shareholders Funds = Preference share + Reserves & Surplus +
Equity Share Capital + Profit and Loss A/c credit balance Fictitious
Assets
And Long Term Debts = Debenture and Long Term Loan

84 | P a g e

(in lacs)
Calculation: Year
Long term funds
Fixed assets
Long term funds to fixed ratio

2007-08
1828.68
19899.42
0.09:1

2008-09
1828.68
17859.64
0.10:1

2008-09
1828.68
25313.66
0.07:1

Interpretation: Long-term ratio decreased from 2.84 to 1.91. It has shown fall in the
ratio. The fixed assets should always be acquired out of long-term funds,
meaning thereby that this ratio should not be less than 100. The company
has not achieved a good ratio as it shows a downward trend.

PROFIT&LOSS ACOOUNT FOR THE YEAR ENDED

85 | P a g e

31st MARCH, 2007-2008

PARTICULARS
INCOME
Gross sales
Less: Excise duty
Net sales
Other income
EXPENDITURE
Cost of Goods sold
Employee Costs
Other Expenses
Depreciation/Amortization/Impairment
PROFIT FOR THEYEAR BEFORE TAX
Provision for taxation
Current
Deferred
Fringe benefit
PROFIT AFTER TAX
Balance of profit brought forward
Balance available for appropriation
APPROPRIATION
First Interim Dividend
Second Interim Dividend
Special Dividend - Proposed
Final Dividend Proposed
Dividend Tax
Transfer to General Reserve
BALANCE CARRIED TO BALANCE SHEET

(in lacs)
2007-08
155321.10
7983.20
147337.90
8478.12
63277.65
11827.68
49521.29
1984.49
5824.66
215.77
425.00
2486.96
8159.57
9519.50
5084.64
2317.10
577.17

PROFIT&LOSS ACOOUNT FOR THE YEAR ENDED

31st MARCH, 2008-2009
86 | P a g e

(in lacs)

PARTICULARS
INCOME
Gross sales
Less: Excise duty
Net sales
Other income
EXPENDITURE
Cost of Goods sold
Employee Costs
Other Expenses
Depreciation/Amortization/Impairment
PROFIT FOR THEYEAR BEFORE TAX
Provision for taxation
Current
Deferred
Fringe benefit
PROFIT AFTER TAX
Balance of profit brought forward
Balance available for appropriation
APPROPRIATION
First Interim Dividend
Second Interim Dividend
Final Dividend Proposed
Dividend Tax
Transfer to General Reserve
BALANCE CARRIED TO BALANCE SHEET

87 | P a g e

2008-09
175815.90
6334..55
169481.35
10775.72
74130.76
14340.65
54960.12
2294.89
4107.50
1031.21
370.00
577.17
12239.35
8159.57
9519.50
3414.02
2902.19
2883.98

 PROFIT&LOSS ACOOUNT FOR THE YEAR ENDED

31st MARCH, 2009-2010
PARTICULARS
INCOME
Gross sales
Less: Excise duty
Net sales
Other income
EXPENDITURE
Cost of Goods sold
Employee Costs
Other Expenses
Depreciation/Amortization/Impairment
PROFIT FOR THEYEAR BEFORE TAX
Provision for taxation
Current
Deferred
Fringe benefit
PROFIT AFTER TAX
Balance of profit brought forward
Balance available for appropriation
APPROPRIATION
First Interim Dividend
Second Interim Dividend
Final Dividend Proposed
Dividend Tax
Transfer to General Reserve
BALANCE CARRIED TO BALANCE SHEET

(in lacs)
2009-10
202464.65
6218.73
196245.92
9845.72
77684.29
15907.35
60263.36
3756.79
157611.79
6430.80
276.77
2883.98
10879.43
9519.50
6799.64
4583.67
4232.58
9194.98

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

88 | P a g e

SOURCES OF FUNDS
SHAREHOLDERS FUNDS
Share capital
Reserve and surplus
LOAN FUNDS
Unsecured loans
Total
APPLICATION OF FUNDS
FIXED ASSETS
Gross block
Less : depreciation
Net block
Capital work in progress and
Advances for Capital Expenditure
INVESTMENTS
CURRENT ASSETS, AND LOANS
AND ADVANCES
Inventories
sundry debtors
Cash and bank balances
Interest Accrued on Investments
Loans and advances
LESS :CURRENT LIABILITY AND
PROVISIONS
Current liability
Provisions
NET CURRENT ASSETS
TOTAL

2007-08

TOTAL

1359.93
14860.69

16220.62
468.75
16689.37

44959.43
25818.85
19140.58
758.84

19899.42
7258.77

7563.85
918.55
14426.28
264.20
16995.67
34693.43
18726.66
13251.54
16689.37

BALANCE SHEET AS AT 31ST MARCH, 2008-2009 (in lacs)

89 | P a g e

SOURCES OF FUNDS
SHAREHOLDERS FUNDS
Share capital
Reserve and surplus
LOAN FUNDS
Unsecured loans
Total
APPLICATION OF FUNDS
FIXED ASSETS
Gross block
Less : depreciation
Net block
Capital work in progress and
Advances for Capital Expenditure
INVESTMENTS
CURRENT ASSETS, AND LOANS
AND ADVANCES
Inventories
sundry debtors
Cash and bank balances
Interest Accrued on Investments
Loans and advances
LESS :CURRENT LIABILITY AND
PROVISIONS
Current liability
Provisions
NET CURRENT ASSETS
TOTAL

2008-09

TOTAL

1359.93
20269.64

21629.57
468.75
22098.32

42525.56
25132.76
17392.80
466.84

17859.64
3832.89

8242.33
1113.45
25114.33
718.76
10021.42
39454.14
16119.18
1363.03
22098.32

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

90 | P a g e

SOURCES OF FUNDS
SHAREHOLDERS FUNDS
Share capital
Reserve and surplus
LOAN FUNDS
Unsecured loans
Total

2009-10

TOTAL

1359.93
31251.23

32611.16
458.75
33069.91

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

25313.66
2100.07

1105536
976.88
34758.44
548.34
11674.43
4265.43
12481.87
3866.15
33069.91

COMMON SIZE STATEMENT OF

PROFIT AND LOSS ACCOUNT
91 | P a g e

(Rs. lacs)
Particular
Income:

2007-08
Rs.

155321.1
Gross sale
0
Less: Excise duty 7983.20
147337.9
Net sales
0
Other income 8478.12
155816.0
Total
2

%
105.41
5.41
100
5.75
105.75

2008-09
Rs.
175815.9
0
6334.55
169481.3
5
10775.72
180257.0
7

2009-10
%
103.73
3.73
100
6.35
106.35

%
202464.6
5
6218.73
196245.9
2
9845.72
206091.6
4

103.17
3.16
100
5.01
105.01

Expenditure:
63277.65
11827.68
49521.29
1984.49
126611.1
1

42.94
8.02
33.61
1.34

Current tax
Deferred tax

COGS.

Employee costs
Other expenses

Depreciation
Total

43.73
8.46
32.42
1.35

85.93

74130.76
14340.65
54960.12
2294.89
145726.4
2

39.58

85.98

77684.29
15907.35
60263.36
3756.79
157611.7
9

5824.66

3.95

4107.50

2.42

6430.80

3.27

(215.77)

0.14

1031.21

0.60

(276.77)

0.14

0.28

370.00

0.21

1.68

577.17

0.34

2883.98

1.46

5.53

12239.35 7.22
8159.57 4.81

8.10
30.71
1.91
80.31

Provision for
taxation

Fringe benefit tax 425.00

Profit after
taxation
Add:
Balance
brought forward 2486.96
Profit available
for appropriation
APPROPRIATI
First Interim
dividend
Second Interim
92 | P a g e

8159.57
-

10879.43 5.54
9519.50 4.85

dividend
final proposed
dividend

9519.50

6.46

6799.64

3.46

Tax on dividend

5084.64

3.45

3414.02

2.01

4583.67

2.33

Transfer to
general reserve

2317.10

1.57

2902.19

1.71

4232.58

2.15

577.17

0.37

2883.98

1.70

9194.98

4.68

Balance caring
forward

Interpretation of the Profit & Loss account as Common

size statement
The net sale is assumed to be 100%. All individual items
of expenses and incomes are shown as percentage of sales.
The net sale of the current year 08-09 is 169481.35. So we can
assume 100%. And calculates the percentage.
Then after we can calculate the other income and we can see that
the percentage of the other incomes are 5.75 (8478.15), 6.35
(10775.72), and 5.01 (9845.72).
We can see that the percentage of the other incomes is not good in
the current year in compare to others in compare the last 2 years.
Common Size statements are found to be very useful for
comparison of last three years.

COMMON SIZE STATEMENT OF

BALANCESHEET
93 | P a g e

(Rs. In Lacs)
2007-08
Particular
SOURCES OF FUNDS
[A] Shareholders fund
Share Capital
Reserves & Surplus

Rs.

1359.93
14860.69

8.14
89.04

468.75

Gross block
Less: Depreciation
Net block
Capital work in
progress and advances for

2009-10
Rs.

1359.93 6.15
20269.64 91.72

1359.93
31251.23

4.11
94.50

2.80

468.75

458.75

1.38

44959.43
25818.85
19140.58

269.38
154.70
114.68

42525.56 192.43
25132.76 113.73
17392.80 78.70

53452.15
28757.37
24694.78

161.63
86.95
74.67

Capital expenditure

758.84

4.54

466.84

618.88

1.87

[B] Investments
[C]Deferred tax assets
[C] Current assets, Loan

7258.77
2782.72

43.49
16.67

17859.64 80.81
3832.89 17.34

2100.07
1790.03

6.35
5.41

[B] Loan fund

Unsecured

Rs.

2008-09

2.12

APPLICATION OF FUND
[A] Fixed assets

94 | P a g e

2.11

7563.85
918.55
14426..28

45.32
5.50
86.43

8242.33 37.29
1113.45 5.03
25114.33 113.64

11055.36
976.88
34758.44

33.43
2.95
105.10

264.20
16995.67

1.58
101.83

718.76
3.25
10021.42 86.07

548.34
11674.43

1.65
35.30

207.87
112.20

39454.14 178.53
16119.18 72.94

42665.43
12481.87

129.01
37.74

3866.15

11..69

33069.91

100

And advances
Inventories
Sundry Debtors
Cash & bank balance
Interest accrued on
investment.
Loan& advances
Less: Current liability and
provisions
34693.43
Current Liabilities
18726.66
Provisions
[D]Net current assets

13251.54

79.40

1363.03

TOTAL

16689.37

100

22098.32 100

95 | P a g e

0.06

CASHFLOW STATEMENT:
Particulars
Cash flow from
Operating
Activities:
Net Profit before
tax
Adjustment for:
Unrealized
Foreign exchange
Loss (Net)
Depreciation
Reversal of
diminution in
value of invt.
Interest expenses
Profit on sale of
fixed assets
Interest income
Dividend from
subsidiaries
Gain on maturity
of Investments
Operating profit
before working
capital changes
96 | P a g e

2008-09(Rs. 2007Lacs)
08(Rs.
Lacs)

200607(rs.lacs)

34530.65

29204.91

20160.59

875.44

23.19

22.07

2294.89
-

1984.49
(750.00)

1525.59

110.01
(980.54)

143.51
(83.70)

98.04
(847.43)

(3136.57)
(397.56)

(2144.87)
-

(1680.75
196.56

(39.13)
33257.19

28377.53

19081.75

Adjustment for
increase/decrease
in Working
capital
Inventories
Sundry Debtors
Loans and
Advances
Current liabilities
and provisions
Cash generated
from operations
Direct taxes paid
Net cash from
operating
activities (A)
Cash flow from
Investing
activities:
Purchase of fixed
assets
Sale of fixed
assets
Sale of
investments in
subsidiaries (Net)
Sale of other invt.
Capital
Repatriation by
Wholly-Owned
subsidiary
Inter corporate
97 | P a g e

(420.74)
(194.90)
933.82

468.78
14.08
473.23

596.91
285.06
1645.16

3186.50

3146.23

5007.29

36761.87

32479.85

21561.94

(4823.45)
31938.42

(4339.56)
28140.29

6138.12
15423.82

(243.50)

(2716.88)

(3844.92)

1107.27

119.45

875.34

(165.28)

3071.48
-

5868.51
956.25

1500.00
-

290.00

(3885.00)

110.00

deposits
Loans to
subsidiaries
Interest received
Dividend from
subsidiaries
Net cash from
Investing
activities (B)
Cash flow from
Financing
activities:
Long term loans
paid
Interest paid
Dividend paid
Repayment of
capital
Dividend Tax
paid
Net cash from
financing
activities (C)
Net increase in
cash and cash
equivalents
(A+B+C)
5Cash and cash
equivalents in the
beginning of the
year
98 | P a g e

(3335.00)

2682.08
775.61

2266.99
-

1718.47
196.56

4182.66

2609.32

555.45

41.25

8.02

(110.01)
(21746.08)
-

(143.51)
(11333.41)
(12130.53)

98.04
12067.56
-

(3657.04)

(3929.04)

1430.47

(25513.13)

(27495.24)

13604.09

10607.95

3254.37

2375.18

14426.28

11171.91

8796.73

Cash and cash

80.10
equivalents taken
over as per the
scheme of
Amalgamation
Cash and cash
25114.33
equivalents at the
end of the year
Cash and cash
equivalents
compromise:
Balances with
scheduled banks
in
Current a/c
Deposits a/c
Unpaid dividend
a/c
Cash and cash
equivalents as at
the end of the
year

99 | P a g e

14426.28

11171.91

3743.77
20745.23
625.33

3571.57
10259.65
595.06

5012.01
5110.86
1049.04

25114.33

14426.28

11171.91

Conclusion
The analysis of annual report of the last three of the
company reveals the company is improving working efficiency
taking step of increasing its turnover.
The analysis reveals that the total income of the company
is increasing and its expenses are decrease. Hence it can be
concluded that the company is performing very efficiently, it has
highly qualified managerial personnel. The analysis also reveals
that the company utilizes its raised sources very efficiently to earn
profit and achieve its objectives.
Company repays there loan regularly which is good sign
for the future.
Ratios show satisfactory situation so it indicate the
companys ability to increase its profit, performance and financial
position is very sound.
Overall it can be concluded that company is performing
very efficiently and therefore it has future prospects in India and
international market.
COLGATE PALMOLIVE LTD. analysis, I can say,
it is financially sound and well managed. The company is trying
to improve its efficiency more and more. We hope that the
company reaches at the top by making strong efforts. It was
tough job to make this repot but last able to complete the
project.
I myself could put into use my theoretical
knowledge. They helping to build my confidence. I am thankful
to all who helped me in the project report.

100 | P a g e

101 | P a g e

BIBLIOGRAPHY
REPORTS
-Annual Report 2007-2008 of GOLGATE-PALMOLIVE

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

BOOKS:
-B.S.Shah Principles of financial Management 4 th edition
Ahmedabad,
-B.S.Shah Prakashan. 2008-09.

WEBSITES:
www.Colgate-palmolive.ltd.com

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