A STUDY ON FINANCIAL PERFORMANCE OF NESTLE

INDIA LIMITED

Project Report submitted to

UNIVERSITY OF CALICUT
In partial fulfillment of the requirement for the award of the degree of

BACHELOR OF COMMERCE (PROFESSIONAL)

Submitted by

RINTA ROSE P J
(CCASBCP014)

Under the supervision of

PROF.K.O FRANCIS

DEPARTMENT OF COMMERCE

CHRIST COLLEGE (AUTONOMOUS), IRINJALAKUDA

MARCH 2021
 CHRIST COLLEGE (AUTONOMOUS), IRINJALAKUDA

CALICUT UNIVERSITY

DEPARTMENT OF COMMERCE
CERTIFICATE

This is to certify that the project report entitled “A STUDY ON FINANCIAL

PERFORMANCE OF NESTLE INDIA LIMITED” is a bonafide record of
project done by RINTA ROSE P J, Reg. No. CCASBCP014, under my
guidance and supervision in partial fulfillment of the requirement for the award
of the degree of BACHELOR OF COMMERCE (PROFESSIONAL) and it has
not previously formed the basis for any Degree, Diploma and Associateship or
Fellowship.

Prof. K.O.Francis Prof .K.O.Francis

Co-ordinator Project Guide
 DECLARATION

I, RINTA ROSE P J, hereby declare that the project work entitled “A

STUDY ON FINANCIAL PERFORMANCE OF NESTLE INDIA LIMITED”
is a record of independent and bonafide project work carried out by me under
the supervision and guidance of PROF.K.O.FRANCIS, Co-ordinator B.com
Professional, Christ College, Irinjalakuda.

The information and data given in the report is authentic to the best of my
knowledge. The report has not been previously submitted for the award of any
Degree, Diploma, Associateship or other similar title of any other university or
institute.

Place: Irinjalakuda RINTA ROSE P J

Date: CCASBCP014
 ACKNOWLEDGEMENT

I would like to take the opportunity to express my sincere gratitude to all

people who have helped me with sound advice and able guidance.

Above all, I express my eternal gratitude to the Lord Almighty under whose
divine guidance; I have been able to complete this work successfully.

I would like to express my sincere obligation to Rev.Dr. Jolly Andrews,

Principal-in-Charge, Christ college Irinjalakuda for providing various facilities.

I am thankful to Prof. K.O.Francis, Co-ordinator of B.Com (Professional), for

providing proper help and encouragement in the preparation of this report.

I am thankful to Ms.Teena Thomas, Class teacher for her cordial support,

valuable information and guidance, which helped me in completing this task
through various stages.

I express my sincere gratitude to Prof.K.O.Francis, whose guidance and

support throughout the training period helped me to complete this work
successfully.

I would like to express my gratitude to all the faculties of the Department for
their interest and cooperation in this regard.

I extend my hearty gratitude to the librarian and other library staffs of my

college for their wholehearted cooperation.

I express my sincere thanks to my friends and family for their support in

completing this report successfully.

RINTA ROSE P J

CCASBCP014
 TABLES OF CONTENTS

CHAPTER NO. CONTENTS PAGE NO:

LIST OF TABLES

LIST OF FIGURES

CHAPTER 1 INTRODUCTION 1–3

CHAPTER 2 REVIEW OF LITERATURE 4 – 13

INDUSTRY AND COMPANY

CHAPTER 3 14 – 20
PROFILE

DATA ANALYSIS AND

CHAPTER 4 21 – 38
INTERPRETATION

FINDINGS, SUGGESTIONS
CHAPTER 5 39 – 40
& CONCLUSION

BIBLIOGRAPHY

ANNEXURE
 LIST OF TABLES

TABLE
TITLE PAGE NO:
NO:

4.1 Table showing current Ratio 21

4.2 Table showing absolute liquidity ratio 22

4.3 Table showing liquid ratio 23

4.4 Table showing debt equity ratio. 24

4.5 Table showing proprietary ratio. 25

4.6 Table showing solvency ratio 26

4.7 Table showing fixed asset to net worth ratio. 27

4.8 Table showing return on equity 28

4.9 Table showing net profit ratio 29

4.10 Table showing total asset turnover ratio 30

4.11 Table showing fixed asset turnover ratio 31

4.12 Table showing current asset turnover ratio 32

4.13 Table showing working capital turnover ratio 33

4.14 Table showing stock turnover ratio 34

Table showing comparative balance sheet of 2015-2016

4.15 35
and2016-2017

Table showing comparative balance sheet of 2016-2017

4.16 36
and2017-2018

Table showing comparative balance sheet of 2017-2018

4.17 37
and 2018-2019

Table showing comparative balance sheet of 2018-2019

4.18 38
and 2019-2020
 LIST OF FIGURES

FIGURE
TITLE PAGE NO:
NO:

4.1 Figure showing current ratio 21

4.2 Figure showing absolute liquidity ratio 22

4.3 Figure showing liquid ratio 23

4.4 Figure showing debt equity ratio 24

4.5 Figure showing proprietary ratio 25

4.6 Figure showing solvency ratio 26

4.7 Figure showing fixed asset to networth ratio 27

4.8 Figure showing return on equity 28

4.9 Figure showing net profit ratio 29

4.10 Figure showing total asset turnover ratio 30

4.11 Figure showing fixed asset turnover ratio 31

4.12 Figure showing current asset turnover ratio 32

4.13 Figure showing working capital turnover ratio 33

4.14 Figure showing stock turnover ratio 34

 CHAPTER 1
INTRODUCTION
 INTRODUCTION
Financial Management is the managerial activity which is concerned with the
planning and controlling of the firm’s financial resources. Though it was a
branch of economics till 1890 as a separate discipline it is of recent origin.

Financial management is concerned with the duties of finance manager in a

business firm. He performs such varied tasks as budgeting, financial
forecasting, cash management, credit administration, investment analysis and
funds procurement. The recent trend towards globalization of business activity
has created demands and opportunities in managerial finance.

Financial statement are prepared and presented for the external users of
accounting information as these are used by investors and financial analysis to
examine the firm’s performance on order to make investment decisions they
should be prepared very carefully and contain as much investment decision and
contain much information as possible. Preparation of the financial statement is
the responsibility of top management. The financial statement generally
prepared from the accounting records maintained by the firms.

Financial performance is an important aspect which influences the long term

stability, profitability, liquidity of an organization. It is the process of
determining the operational and financial characteristics of a firm from
accounting and financial statements. The goal of such analysis is to determine
the efficiency and performance of firm’s management as reflected in the
financial records and reports.

Financial analysis is the process of examining a company’s performance in the

context of its industry and economic environment in order to arrive at a
decision or recommendation. Often, the decision and recommendations
addressed by financial analysts pertain to providing capital to companies
specifically, whether to invest in the company’s debt or equity securities and at
what price. An investor debt securities is concerned about the company’s
ability to pay interest and to repay the principal lent. An investor in equity
securities is an owner with a residual interest in the company and is concerned
about the company’s ability to pay dividends and the likelihood that its share
price will increase.

Overall, a central focus of financial analysis is evaluating the company’s ability

to earn a return on its capital that is at least equal to the cost of that capital, to
profitably grow its operations, and to generate enough cash to meet obligations
and pursue opportunities.

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The process of financial analysis is carried out by professionals who work by
preparing reports with the help of ratio’s containing information of Nestle India
limited. By analyzing the financial performance it helps the management to
improve the performance and also helps to make changes in their financial
position.

1.1Significance of the study

Financial statements are records to convey the business activities and the
financial performance of a business, they aim to provide a picture of the
financial position and performance of a business based on three financial
statement produced on a regular, recurring basis and together they provide an
overall picture of financial health. Financial statements are often audited by
government agencies, accountants, firms, investors etc.

Financial statement records all the financial position of the business at a

particular date while the income statement shows the entity’s financial
performance which normally includes the incomes and expenses incurred
during the period.

By using the statements, stakeholders could understand and assesses the

entity’s financial performance and position and especially clearly knows each
element such as revenues, expenses, asset, liabilities and equity.

Significance of the study of Nestle India Ltd like in the fact that analysis of
financial performance help the management to improve the performance of
company based on the findings of the study and also to make changes in their
financial position.

1.2Objective of the study

Major objective of the study:

 Ascertain the solvency and liquidity position of Nestle India during

2015-16 to 2019-2020.
 To understand the profitability of the company.
 To evaluate the financial performance of the company during the study
period.
 To suggest measures to improve the performance of company based on
the findings of the study.

1.3 Research Design

1.3.1 Nature of study

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The study is designed in an analytical way

1.3.2 Nature of data

The study is mainly based on secondary data

1.3.3 Sources of data

Major sources of secondary data include companies published financial

statement such as profit & loss account and balance sheet. In addition, data are
obtained from companies website, books, journal and internet.

1.4 Period of study

The study pertains to five years from 2015-16 to 2019-20

1.5 Tools for analysis

The main tools used for analysis of collected data are:

 Ratio Analysis
 Comparative Balance Sheet

1.6 Limitations of the study

 Errors in the secondary data would have affected the study
 The time and resources available for the data are limited, so indepth
study could not be conducted.
1.7 Chapterization

Chapter 1: Introduction –It deals with significance of study, objectives,research

. design etc

Chapter 2: Review of literature – It deals with conceptual review and empirical

review

Chapter 3: Industry And Company Profile – It deals with industry and profile

the Nestle India ltd

Chapter 4: Data Analysis And Interpretation – It deals with analysis of

collected data using various ratios and their interpretations

Chapter 5: Findings ,suggestions And Conclusion

3
 CHAPTER 2
REVIEW OF LITERATURE
 REVIEW OF LITERATURE

2.1 CONCEPTUAL REVIEW

Financial performance is the process of measuring the results of a firm’s
policies and operations in monetary terms. It is used to measure firms overall
financial health over a given period of time and can also be used to compare
similar firms across the same industry or to compare industries or sectors in
aggregation. It refers to the degree to which financial objectives being or has
been accomplished and is an important aspect of finance risk management.
Financial performance analysis includes analysis and interpretation of financial
statements in such a way that it undertakes full diagnosis of the profitability
and financial soundness of the business. Ratio analysis and comparative
statements are the important tools used for the analysis of financial
performance of the company.

Tools or Techniques of Financial Analysis:

 Ratio analysis
 Comparative balance sheet
 Trend analysis
 Common size statement
 Fund flow statement
 Cost volume profit analysis
 Financial statement

2.1.1 Ratio Analysis

Ratio analysis is a widely – use tool of financial analysis. It can be used to

compare the risk and return relationship of firms of different sizes. It is defined
as the systematic use of ratio to interpret the financial statements so that the
strengths and weakness of a firm as well as its historical performance and
current financial condition can be determined. The term ratio refers to the
numerical or quantitative relationship between two items and variables. These
ratios are expressed as (i) percentages, (ii) fraction, and (iii) proportion of
numbers. These alternative methods of expressing items which are related to
each other are, for the purpose of financial analysis, referred to as ratio
analysis. It should be noted that computing the ratios does not already inherent
in the above figures of profit and sales. What the ratio do is that they reveal the

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relationship in a more meaningful way so as to enable equity investors,
management and lenders make better investment and credit decisions.

Classification Of Ratios:

 Liquidity Ratio
 Solvency Ratio
 Activity Ratio
 Profitability Ratio

2.1.2 Types Of Liquidity Ratio:

The importance of adequate liquidity in the sense of the ability of a firm to

meet current/short-term obligations when they become due for payment can
hardly be overstresses. In fact, liquidity is a prerequisite for the very survival of
a firm. The short-term creditors of the firm are interested in the short-term
solvency or liquidity of a firm. But liquidity implies from the viewpoint of
utilization of the funds of the firm that are idle or they earn very little. The
liquidity ratio measures the ability of a firm to meet its short-term obligations
and reflect the short-term financial strength and solvency of a firm.

A.Current Ratio:

The current ratio is the ratio of total current assets to total current liabilities. It
is calculated by dividing current assets by current liabilities.Generally, current
ratio of 2:1 is considered satisfactory or ideal.

Current ratio = current asset/current liabilities

The current assets of a firm represents those assets which can be in the ordinary
course of business, converted into cash within a short period of time, normally
not exceeding one year and include cash and bank balances, marketable
securities, inventory of raw materials, semi-finished and finished goods,
debtors net of provision for bad and doubtful debts, bill receivable and prepaid
expenses. The current liabilities defined as liabilities which are short term
maturing obligations to be met, as originally contemplated, within a year ,
consist of trade creditors, bills payable, bank credit, and provision for taxation,
dividends payable and outstanding expenses.

B.Liquid Ratio:

It is the ratio of liquid assets to current liabilities. It is the measure of instant

debt paying ability of the business enterprise. It is also known as quick ratio,
acid test ratio, or near money ratio. Ideal ratio is 1:1.

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Liquid ratio = liquid assets/current assets

C.Absolute Liquidity Ratio:

This ratio is also known as cash position or super quick ratio. It is a variation of
quick ratio. This ratio establishes the relationship absolute liquid assets and
current liabilities. Absolute liquid assets are cash in hand. Bank balance and
readily marketable securities. Both the debtors and bills receivable are
excluded from liquid assets as there is always an uncertainty with respect to
their realization. In other words, liquid assets minus debtors and bill receivable
are absolute liquid assets. The acceptable norm of this ratio is 0.5:1. In this
form of formula:

Absolute liquidity ratio = cash in hand & at bank + marketable

securities/current liabilities

2.1.3 Solvency Ratio

Solvency refers to the ability of the firm to pay its outside liabilities both short
term and long term. Solvency ratios are used to analyze long term financial
position of the business.

A.Debt-Equity Ratio:

It express the relationship between long term debt and equity. Long term debt
means funds invested by outsiders. It includes debenture, mortgages, all long
term loans.

Debt equity ratio = long term debt/shareholders fund

B.Proprietary Ratio:

It establishes the relationship between shareholders or proprietors fund and

total assets. It shows how much funds have been contributed by shareholders in
the total assets of the firm.

Proprietary ratio = shareholders fund/total asset

C.Solvency Ratio:

This ratio expresses the relationship between total assets and total liabilities of
a business. A firm is said to be solvent when it has assets worth more than its
outsiders liabilities. It is also known as ratio of total assets to total debt.

Solvency ratio = total asset/total debt

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D.Fixed Asset To Net Worth Ratio:

This ratio establishes the relationship between two components that is fixed
assets and proprietors fund. This ratio indicates the extent to which
shareholders’s funds are invested in the fixed assets. This ratio is also known as
proprietors fund ratio.

Fixed asset to net worth ratio = fixed asset/total shareholdersfund

2.1.4 Profitability Ratio:

The main object of a business concern is to earn profit. A company should earn
profits to survive and to grow over a long period. The operating efficiency of a
business concern is ultimately adjudged by the profits earned by it. Profitability
should distinguish from profits. Profits refers to the absolute quantum of profit,
whereas profitability refers to the ability to earn profits. In other words, an
ability to earn the maximum from the maximum use of available resources by
the business concern is known as profitability. Profitability reflects the final
result of a business operation. Profitability ratios are employed by the
management in order to assess how efficiently they carry on business
operations. Profitability is the main base for liquidity as well as solvency.
Creditors, bank and financial institutions are interest obligations and regular
and improved profits enchance the long term solvency position of the business.

A.Return On Equity:

The return on equity ratio or ROE is a profitability ratio that measures the
ability of a firm to generate profits from its shareholders investments in the
company. In other words, the return on equity ratio shows how much profit is
produced by a single shareholders equities. So a return on investment 1 means
that every rupee of a common stockholders equity generates 1 rupee of income.
This increases the potential of investors, the formula to find ROE:

ROE = profit after tax/average equity share capital

B.Net Profit Ratio:

It is also known as net margin. This measures the relationship between net
profits and sales of a firm.

Net profit margin = earning after interest & tax/net sales*100

A high net profit margin would ensures adequate return to the owners as well
as enable a firm to withstand adverse economic conditions when selling price is
declining, cost of production is rising and demand for the product is falling. A

7
low net margin has the opposite implications. However, a firm with low profit
margin can earn a high rate of return on investment if it has a higher turnover.
This aspect is covered in detail in the subsequent discussion. The profit margin
should therefore be evaluated in relation to the turnover ratio. In other words,
the overall rate of return is the product of the net profit margin and the
investment turnover ratio. Similarly, the gross profit margin and net profit
margin should be jointly evaluated.

C.Gross Profit Ratio:

Gross profit ratio (GP ratio) is a financial that measures the performance and
efficiency of a business by dividing its gross profit figure by the total net sales.
It is then called gross profit percentage or gross profit margin. A gross profit
margin ratio of 65% is considered to be healthy.

Gross profit ratio = (gross profit/revenue from operation)*100

D.Operating Cost Ratio:

It is computed by dividing operating expenses of a particular period by net

sales made during that period. It is also known as operating expense ratio.
Between 60% to 80% is considered as good.

Operating cost ratio = (operating cost/revenue from operation)*100

2.1.5 Activity Ratio:

Activity ratios are concerned with measuring the efficiency in asset

management. These ratios are called efficiency ratios or asset utilization ratios.
The efficiency with which the assets are used would be reflected in the speed
and rapidly with which assets are converted into sakes. The greater is the ratio
of turnover or conversion, the more efficient is the utilization of assets, other
things being equal. For this reason, such ratios are designed as turnover ratios.

A.Total Asset Turnover Ratio:

Total asset turnover ratio measures the ability of the organization to efficiently
produce sale and used to evaluate the operations of the business. Ideally a
company with high total asset turnover ratio can operate with fewer assets than
a efficient competitor and so requires a less debt and equity to operate. This is
calculated by dividing sales by total asset i,e the formula is as follows:

Total asset turnover ratio = sales/total assets

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Ideal ratio of total asset turnover ratio that is between 0.25 and 0.5.

B.Fixed Asset Turnover Ratio:

The ratio express the relationship between cost of goods sold or sales and fixed
assets. following formula is used for measurement of the ratio.

Fixed asset turnover ratio = sales/net fixed asset

In computing fixed assets turnover ratio, fixed assets are generally taken at
written down value at the end of the year. However, there is no rigidity about it.
It may be taken at the original cost or at the present market value depending on
the object of comparison. In fact, the ratio will have automatic improvement if
the written down value is used. It would be better if the ratio is worked out on
the basis of the original cost of fixed assets.

C.Current Asset Turnover Ratio:

An activity ratio measuring the firms ability to generate sales through current
assets (cash, inventories) it can be calculated by dividing the firms net sales by
average current assets. A high current asset turnover ratio indicates a high use
of current assets of the company. The decrease of current assets turnover
indicates the firms increasing need of sources of finance. If the access to
sources of finance is limited, this will cause the increase of the company’s
financial expenses. Ideal ratio is same as the total asset turnover ratio. The
formula is:

Current asset turnover ratio = net sales/current asset

D.Working Capital Turnover Ratio:

This ratio, should the number of times the working capital results in sales. In
other words, this ratio indicates the efficiency or otherwise in the utilization of
short term funds in making sales. Working capital means the excess of current
over the current liabilities. Ideal ratio. Following formula is used to measure
this ratio

Working capital turnover ratio = sales/net working capital

E.Stock Turnover Ratio:

Stock turnover ratio shows the relationship between cost of goods sold and
average stock or inventory. It is also called merchandise turnover ratio. It is
obtained by dividing cost of goods sold by average stock. It indicates the
number of times the stock id turned over or converted into sales. It is used to

9
test the efficiency in inventory management, a high turnover indicates that the
inventories is sold fast. Ideal ratio is between 5 and 10. Formula for
calculation:

Stock turnover ratio = revenue from operations/average inventory

2.1.6 Comparative Balance Sheet Analysis

A comparative balance sheet is a statement that shows the financial position of

an organization over different periods for which comparison is made or
required. The financial position is compared with two or more periods to depict
the trend, direction of change, analyze and take suitable actions.

A Company balance sheet analysis is as simple way of comparing the data on

two or more balance sheets that have different dates. A comparative balance
sheet analysis is a method of analyzing a company balance sheet over time to
identify changes and trends.

The comparative balance sheet has two-column of amount against each balance
sheet items; one column shows the current year financial position, whereas
another column will show the previous years financial position so that investors
or other stakeholders can easily understand and analyze the companys’s
financial performance against last year.

2.2 EMPIRICAL REVIEW

The review of literature guides the researchers for getting better understanding
of methodology used, limitations of various available estimation procedures
and data base and lucid interpretation and reconciliation of the conflicting
results. Besides this, the review of empirical studies explore the avenues for
future and present research efforts related with the subject matter. Empirical
literature is reported in such a manner that other investigators understand
precisely what was done and what was found in a particular research study to
the extent that they could replicate the study to determine whether the findings
are reproduced when repeated.

Dr.A Ramya & Dr. S. Kavitha (2017)They studied financial performance of

Maruti Suzuki ltd from 2010-2015. Profitability ratio activity ratio are used for
the study. They found that gross profit ratio, current ratio, asset turnover ratio,

10
net profit turnover ratio all declined when we reach 2014-2015. They also
come to conclusion that the calculation in the financial statement are prepared
by desired management and policies that it cannot produce complete picture
about its performance.

Sneha Lata & Dr. Robin Anand (2017)They conducted financial performance
of Mahindra &Mahindra ltd before merger and after merger with the Kerean
company from the year 2007-2017. They used tools such as ratio analysis,
arithmetic mean, standard deviation and t-test. Company’s profit margin has
been pulled back after merging that from 18% it went down to 13%. The
merger made for increasing profit has declined the value of business of
Mahindra & Mahindra ltd and the reason they are stating are that sometimes
other merger took place in the recent years may be the reason for decline.

Anupa Jayawardhana (2016) She studied on financial performance of Adidas

from the year 2010-2014. She uses tools like horizontal analysis, trend analysis,
vertical analysis ratio and key ratio. He come to conclusion that they should
reduce their operating expenses and capital should be invested in productive
asset.

Dr.M Ravichandran & M Venkat Subramanian (2016) studied on Force Motors

formerly known as Bajaj Tempo from 2010-2015. They used ratio analysis,
comparative financial statement analysis. The company’s financial
performance is good that it shows an increase in reserve and surplus and
decrease in borrowings. They suggest that it can further improve by
concentrates on its operating, administrative and selling expenses and by
reducing the expenses.

Kaur Harpreet (2016) The author tries to examine the qualities and quantities
performer of Maruti Suzuki Co. & how had both impact on its market share in
India, for this study secondary data has been collected from annual reports,
journals, reports automobile sites. Result shows that MSL has been
successfully leading automobile sector in India for last few years.

Imran Khan (2016)Here he studies analyze the financial performance of

Britannia from 2011-2012 to 2015-2016 and used ratio analysis as the tool for
the same. Through his study he found that sales, operating profit margin, net
profit margin are in a increasing trend and debt equity ratio and return on assets
how decrease. He also put up some suggestions like current asset should be
increased, debt capital should be increased.

Anu B (2015) made an attempt to examine the relationship between capital

structure indicators, market price per share and also to test the relationship

11
between debt equity and market price per share of selected companies. They
study concludes that all three companies support the hypothesis that there is
relation between debt, equity and MPS.

Krishnaveni M & Vidya (2015)author has selected 87 companies out of 242

companies in capital line database to discuss the standard current ratio of
automobile industry is matched with tractor and four sectors like engine part,
lamps, gears and ancillaries with standard norms. The study concludes that
current and liquidity ratio of automobile industry is matched with tractor and
the four sectors but other sectors have to improve the repaying capacity to
strengthen the financial aspects.

Kumar Rakesh Rasiklalajani & Bhatt Satyaki J (2015)The proposed research is

intended to examine the trend and pattern of financing the capital structure of
Indian companies. The study is to analyze the determinants of total ratios as
well as determinants of short term and long term ratios.

Agrawal, Nidhi (2015) the study focus on the comparative financial

performance of Maruti Suzuki and Tata motors ltd. The financial data and
information required for the study are drawn from the various annual reports of
companies. The liquidity and leverage analysis of both the firms are done. To
analyze the leverage position four ratios are considered namely capital gearing,
debt – equity, total debt and proprietary ratio. The results shows that Tata
motors ltd has to increase the portion of proprietor’s fund in business to
improve long term solvency position.

Shenda Vikram (2014)this research will be helpful for the new entrants and
existing car manufacturing companies in India to find out the customer
expectations and their market offerings. The objective of the study is the
identifications of factors influencing customers performance for particular
segment of cars.

Anantlodha (2014)in his project studied on company accounts of the year 2012,
2013. He uses tools like swot analysis, ratio analysis, du-point analysis, cross
sectional analysis and cash flow analysis. And finally he come to a conclusion
that company is depending on owners fund rather than borrowed fund that its
profits are increasing in growing rate and its net income are 4% hugher than its
expenses.

Huda Salhe Meften & Manish Roy Tirkey (2014) have studied the financial
analysis of Hindustan Petroleum Corporation Ltd. The study is based on
secondary data. The company has got excellent gross profit ratio and trend is
rising in with is appreciable indicating efficiency in production cost. The net

12
profit for the year 2010-11 is excellent & it is 8 times past year indicating
reduction in operating expenses and large portion of net sales available to the
shareholders of the company.

Dhole Madhavi (2013) Investing the impact of price movement of share on

selected company performance. It advise due investors consider various factors
before choosing the better portfolio. Sentimental factors do play a role in price
movement only in short term but in long run annual performance is sole factor
responsible for price movement.

Conclusion

In this chapter, the review of literature mainly focus on financial performance,

profitability of Nestle India Ltd. So, there is scope of detailed study of financial
performance of Nestle.

13
 CHAPTER 3
INDUSTRY AND COMPANY
PROFILE
 INDUSTRY AND COMPANY PROFILE

3.1 INDUSTRY PROFILE

Consumer products industry manufactures and markets everything from food,
beverages, toiletries, and small appliances. The manufactures in this industry
deal with acquisition of raw materials from suppliers, processing the raw
materials to end products for the consumers, and marketing the products to the
end customers, distributors, retailers, and wholesalers.

The consumer products industry is the foundation of the modern consumer

economy. It is because the sector does not only generate portions of the gross
domestic products but also pumps a substantial amount of funds into other
industries such as the retail and advertising sector.

The consumer products sector is into four categories they include food,
toiletries, cosmetics, and beverages.

Most firms in this sector will produce products that primarily fit into one of the
four groups; however, a firm may have some bands that cut across the lines of
the four categories. Success in the consumer products sector depends on the
level of marketing a single product primarily through promoting the brand
name.

The competition in the consumer products industry is for the shelf space;
therefore firms strive to have a sophisticated package design, involving
marketing, and satisfying customers. The challenges faced in the consumer
products sector include; addressing the changing demands of customers, going
through the consolidating market, and execution of strategies that are
significant to profitable growth.

The sector produces two types of goods. They are durable and nondurable
goods. The durable products are goods that have a long lifespan. Examples of
durable goods include; electronics, cars, machine, and tools. The nondurable
goods are those that do not last as long. They include; cosmetics, food, and
clothing.

Both of the durable and nondurable goods are sold door to door, retail stores,
online, and by mail order. Retail is a significant aspect of consumer products
industry as they sell the products that manufacturers produce. The sector
include workers with a broad scope of skills and educational backgrounds.

14
Some of the career paths in the consumer products industry include those in
administrative support, product development, sales, manufacturing, law and
marketing. The main activities in the consumer products sector include:

•Supply chain: It is an integral part of the industry as it helps in improving

financial position, eliminating redundant steps, increasing the negotiating
power between manufacturers and suppliers, providing a way of achieving
competitive advantage without lowering your prices, and delivering of orders
faster to customers.

•Products and services: They should be of better and achieve regulatory

compliance. Identifying the market requirements under production planning is
also a key to getting profits in the CP sector.

•Retailer (customer) operations: These operations are performed by individuals

who are on the frontline of improving customer service in stores and driving
transactions to ensure their basket sizes attract customers.

•Marketing: It is a necessity in the CP sector as it involves the tactics that a

company can use to promote their brands in the market.

3.1.2 Key Segments In Consumer Products Industry

•Food and beverages: It comprises of manufacturers who produce, regulate,

manage and distribute food and beverages.

•Household: It comprises of manufacturers who produce products used at

homes.

•Personal care: It comprises of manufacturers who produce products used for

personal hygiene and beautification purposes.

•Wholesale distribution industry: It involves primary engagement between the

selling merchandise, customers, and retailers.

•Agricultural industry: It involves cultivation of land, raising crops, breeding,

raising livestock, and farming.

3.2 PROFILE OF NESTLE INDIA LTD

Nestle India ltd, one the biggest players in FMCG segment, has its presence in
milk & nutrition, beverages, prepared dishes & cooking aids & chocolate &
confectionery segments. The company is engaged in the food business. The
food business incorporates product groups, such as milk products and nutrition,
15
beverages, prepared dishes and cooking aids, chocolates and confectionery.
Nestle India manufactures products under brand names, such as Nescafe,
Maggi, Milkybar, Milo, Kit Kat, Bar-one, Milkmaid and Nestea.

The company has also introduced products of daily consumption and use, such
as Nestle Slim Milk, Nestle Fresh ‘n’ Natural Dahi and Nestle Jeera Raita. The
company’s brands include milk products and nutrition, prepared dishes and
cooking aids, beverages, and chocolates and confectionery. Their milk products
and nutrition includes Nestle Everyday Dairy Whitener, Nestle Everyday Ghee,
Nestle Milk, Nestle Slim Milk and Nestle Dahi. Beverages include Nescafe
Classic, Nescafe sunrise premium, Nescafe sunrise special and Nescafe
Cappuccino. Nestle India is a subsidiary of Nestle S.A. of Switzerland.

The company has presence across India with 8 manufacturing facilities and
four branch offices spread across the region. The four branch offices in the
country help facilitate the sales and marketing of its products. They are in
Delhi, Mumbai, Chennai and Kolkata. The company’s head office is located in
Gurgaon, Haryana.

Nestle India Ltd was incorporated in the year 1956. The company set up their
first production facility in the year 1961 at Moga in Punjab. In the year 1967,
they set up their second plant at Choladi in Tamil Nadu as a pilot plant to
process the tea grown in the area into soluble tea. In the year 1989, they set up
a factory at Nanjangud in Karnataka.

In the year 1990, the company entered into the chocolate business by
introducing Nestle premium chocolate. In the year 1991, they entered in joint
venture floated by the parent in collaboration with BM khaitan group to set up
a facilities to manufacturing a range of soya based products. In the year 1993,
they set up a factory at Samalkha in Haryana. In the year 1995, the company
launched the company’s worldwide legendary brand chocolate, Kitkat.

The company commissioned two factories in Goa at Ponda and Bicholim in the
year 1995, and 1997 respectively. In the year 1999, the company launched the
product, Nestle Growing Up Milk nationally. In April 2000, they forayed into
the Ultra Heat Treated (UTH) liquid milk market. In the year 2001, the
company launched Nestle Pure Life bottled water. Within few months, they
again launched their second water brand-san Pellegrino-in the Indian market.
The company also made their foray into the iced tea segment.

In the year 2004, a project has been intiated to upgrade the production
technology for infant nutrition products at the Samalkha factory. Nestle India
Ltd recognized for its outstanding performance in Exports by the coffe board of

16
India in the Export Awards 2004-05 as the Best Exporter of Instant coffee, Best
Exporter to Russia & CIS countries (coffee) and Best Exporter for Far East
Countries (Coffee). The company bestowed the UDYOG RATNA award by
the PHD chamber of commerce and industry to recognize Nestles significant
contribution to the economic development of Punjab for the year 2005. The
company set up a new department-the channel & category sales development
(CCSD) to develop new solutions for the various channel and customers and
improve the implementation of commercial plans in the market.

In the year 2006, the company set up their seventh factory at Pantnagar in
Uttarkhand. In the year 2007, CNBC Asia presented the company with the
India Innovator of the year award. The company’s four factories were awarded
the internationally recognized external certification ISO 14001 for adherence to
environmental processes and OSHAS 18001 for Health and Safety.

In the year 2008, the company launched Nestle Nestive Pro-Heart Milk with
Omega-3 in Mumbai. Nestle Nestive Pro-Heart is part of daily diet and has
Omega-3 heart friendly nutrients scientifically known to help manage
cholesterol. As part of their ongoing commitment to offering best in class
nutrition products to Indian consumers, the company launched NESTLE NAN
3, a follow-up formua for older infants.

During the year, MAGGI PICHIKOO Tomato Ketchup was launched in a

unique easy to handle day pack to drive affordability, taste and convenience for
a larger number of consumers. The company also launched another pioneering
product, MAGGI Bhuna Masala, to cook tasty and healty everyday meals,
more conveniently. The company also launched Nestle Kitkat Mini and Nestle
Bar One Mini, at Rs 3 price to expand the repertoire of offerings. Similarly,
they launched Nestle Kitkat Chunky at Rs 15 to strengthen the range of
wellness oriented Nestle products that consumers can choose from. The
company’s three more factories were awarded the internationally recognized
external certification ISO 14001 for adherence to environmental processes and
OSHAS 18001 for Health and Safety. With this, all the seven factories of the
company now have ISO 14001 and ISO 18001 certifications.

In the year 2009, the company provided inputs to the group R&D for
development of an innovative product Maggi Bhuna Masala. They launched
Maggi Nutri-Licious Pazzta. During the year, Maggi further leveraged their
strengths to drive affordable nutrition and launched two new products, namely,
Maggi Rasile Chow and Maggi Masala-ae-Magic. They launched Nestle Kitkat
in a new unique single finger and Nestle Much Guru pack at the higher price
point.

17
The company acquired the Healthcare Nutrition business of speciality foods
India pvt Ltd with effect from January 1, 2010. In 2011, Nestle opens new
plant in Karnataka, investing Rs 360 cr. In 2013, the company reviews the
general licence agreement. The company also acquires 26% minority stake in
indocon agro and allied activities pvt Ltd. The company commences export of
noodles, sauces from new Mangalore port.

on In May 2015, Food Safety Regulators from the Uttar Pradesh, India found
that samples of Nestle leading noodles Maggi had up to 17 times beyond
permissible safe limits of lead in addition to monosodium glutamate. On 3 June
2015, New Delhi stores for 15 days because it found lead and monosodium
glutamate in the eatable beyond permissible limit. The Gujarat FDA on 4 June
2015 banned the noodles for 30 days after 27 out of 39 samples were detected
with objectionable levels of metallic lead, among other things. Some of India’s
biggest retailers like future group, Big Bazar, Easyday and Nilgiris have
imposed a nationwide ban on Maggi. The ban has been repealed by the
Government of India, with effect from the end of 2015, after the company
cleared court directed safety tests. The test results from all laboratories
mandated by the Bombay high court have validated Nestle India position that
Maggi Noodles are safe for consumption.

On 29 April 2016, Nestle India announced the launch NESCAFE SUNRISE

INSTA-FILTER- Which provides the taste of filter coffee and yet does not
require a filter. On 17 August 2016, Nestle India announced the launch of new
variants of Maggi Noodles .On 20 March 2017, Nestle India announced the
launch of MILO Ready to drink, a cocoa-malt milk beverage crafted specially
for growing children.

During 2018, the company bagged Employee Engagement Leadership Award

in the category best intitative in benefits for working mothers at the Employee
Engagement Leadership Converge 2018. Nestl India won ‘Best Overall
Excellence in CSR’ at the National CSR Leadership Awards 2019’. The
company also received three awards at Nielsen Breakthrough Innovation
Award for NESCAFE Ready-to-drink, Maggi Masalas of India and KITKAT
Strawberry Duo.

3.2.1 Mission

Positively influence the social environment in which we operate as responsible

corporate citizens, with due regard for those environmental standards and
societal aspirations which improve quality of life.

18
3.2.2 Vision

To be a leading, competitive, Nutrition, Health and wellness company

delivering improved shareholder value by being a preferred corporate citizen,
preferred employer, preferred supplier selling preferred products.

3.2.3Milestone Achevied

CNBC Awaaz Consumer Awards has honoured Nescafe as the most preferred
coffee brand. Business India has rated Nestle India as No.1 on Return on
Capital Employed amongst Super 100 companies.

In 2011-2012 Nestle India was awarded the ‘Best Exporter of Instant Coffee’,
‘Highest Exporter to Russia and CIS’, ‘Highest Exporter to Far East
Countries’.

3.2.4 Products

Milkmaid

A partly skimmed sweetened condensed milk, nestle milkmaid is a versatile

product and excellent as a dessert ingredient. With milkmaid, you can whip up
lip-smacking desserts for your family in the shortest possible time.

Lactogen

We supply milkoplex bolus which helps in stimulating the milking power of

psychologically disturbed milk animals such as cows and buffaloes. Some of
the psychological condition for which milkoplex bolus is used in animals.

Nestle Cerelac

Our range is highly hygienic and has excellent strength that prevents the food
from dust, moisture, and other contaminants, thereby increases shelf life.
Further, our range is available in different finishes and at most affordable rates
to the clients.

Nestle Nescafe

We are engaged in offering instant Nescafe Premix which is prepared by just

adding hot water. It is instant to prepare, and additional sugar or milk is not
required. We procure these instant Nescafe Premix from reliable vendors of the
market, keeping in mind the varied requirements of our clients. These are made
using perfect proportions ensuring rich taste and pleasant aroma.

19
Nestle Munch

We offer instant chocolate premixes which is of high standards. Recipe based

exotic beverages to have an intense lingering experience. We manufacture the
most luscious and refreshing Instant chocolate Premix. We use meticulously
selected chocolate to create the most natural coffee flavor. As the name
suggests, this coffee premix is very convenient to use and provides great taste.

Nestle Kitkat

Chocolate is the choicest food item among people for celebrating various
occasions and parties. Using pure milk these chocolate are made which are
blended with dry fruits to bring a delicious and crunchy taste. These chocolate
are further finished with square shaped cakes and are packed using quality
packing materials which keep them fresh and hygienic for a long period of
time.

Nestle Maggi

As a reputable trader, we are always ready with fresh stock of the best quality
Maggi Masala Noodles. We provide Maggi Masala Noodles to popular outlets
in India and other retail shops. Moreover, Maggi masala Noodles are always in
demand in the market.

20
 CHAPTER 4
DATA ANALYSIS AND
INTERPRETATION
 DATA ANALYSIS AND INTERPRETATION

The data collected was analyzed using several variables. The result of analysis
are given below.

4.1 Liquidity Ratio

4.1.1 Current Ratio

Current ratio=current assets/current liabilities

Table 4.1 Showing Current Ratio

Current
Current Assets
Year Liabilities(Rs.in Ratio
(Rs. in cr)
cr)
2015-2016 3278.99 1632.70 2.00

2016 -2017 3937.39 1492.71 2.63

2017-2018 4736.95 1854.95 2.55

2018-2019 3817.17 2147.51 1.77

2019-2020 4185.08 2492.55 1.67

( Sources-complied Annual report)
As conventional rule, a current ratio of 2:1 considered as satisfactory. This
ideal ratio means that the assets shall be at least twice the current liability.
In the past two years the company is not able to attain the ideal ratio.

Figure 4.1 Current Ratio

1
ratio
0
2015-2016
2016-2017 ratio
2017-2018
2018-2019
2019-2020

21
4.1.2 Absolute Liquidity Ratio

Absolute liquidity ratio=cash+marketable securities/current liabilities

Table 4.2 Showing Absolute Liquidity Ratio

Cash&
Current
Marketable
Year Liabilities(Rs.in Ratio
Securities (Rs.in
cr)
cr)
2015-2016 880 1632.70 0.53

2016-2017 1457.42 1492.71 0.97

2017-2018 1610.06 1854.95 0.86

2018-2019 1308.05 2147.51 0.60

2019-2020 1769.87 2492.55 0.71

( Sources- complied Annual report)

It is the relationship between absolute liquid asset and current liabilities. Ideal
ratio of absolute quick ratio is 0.5:1. The highest ratio obtained in the year
2016-2017.The company follows the ideal ratio.

Figure 4.2 Absolute Liquidity Ratio

0.5

ratio
0
2015-2016
2016-2017 ratio
2017-2018
2018-2019
2019-2020

22
4.1.3 Liquid Ratio

Liquid ratio = liquid assets/current liabilities

Table 4.3 Showing Liquid Ratio

Current
Liquid
Year Liabilities(Rs.in Ratio
Assets(Rs.in cr)
cr)
2015-2016 880.00 1632.70 0.53

2016-2017 1457.42 1492.71 0.97

2017-2018 1610.06 1854.95 0.86

2018-2019 1308.05 2147.51 0.60

2019-2020 1769.87 2492.55 0.71

(Sources-complied Annual report)

Generally, liquid ratio of 1:1 is considered as satisfactory. This means that

liquid assets are just equal to the current liabilities. For this company the past
five years show a less than liquid ratio, when compared to the satisfactory ratio.
It further means that, the company is not able to pay off its current liabilities.

Figure 4.3 Liquid Ratio

2015-2016
2016-2017
2017-2018
2018-2019
2019-2020

23
4.3 Solvency Ratio

4.3.1 Debt Equity Ratio

Debt equity ratio = long term debt/shareholders fund

Table 4.4 Showing Debt Equity Ratio

Year Long Term Debt Shareholders

Ratio
(Rs.in cr) Fund(Rs.in cr)

2015-2016 135.04 3013.70 0.04

2016-2017 46.35 3420.59 0.01

2017-2018 40.14 3673.74 0.01

2018-2019 46.98 1932.26 0.02

2019-2020 46.55 2019.34 0.02

( Sources-complied Annual report)

The standard debt equity ratio is 1:1. Here, the company shows lower ratio. It
indicates that it is better for the creditors. But this lower ratio is not a
satisfactory ratio for the shareholders as it indicates the firm has not been able
to use outside fund to manage their earning

Figure 4.4 Debt Equity Ratio

0.045
0.04
0.035
0.03
0.025
0.02 ratio
0.015
0.01
0.005
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020

24
4.3.2 Proprietary Ratio

Proprietary ratio = shareholders fund/total asset

Table 4.5 Showing Proprietary Ratio

Shareholders Total Asset(Rs.in

Year Ratio
Fund(Rs.in cr) cr)

2015-2016 3013.70 6805.97 0.44

2016-2017 3420.59 7362.59 0.46

2017-2018 3673.74 8088.08 0.45

2018-2019 1932.26 7058.20 0.27

2019-2020 2019.34 7899.73 0.25

(Sources-complied Annual report)

Ideal ratio of proprietary ratio is 0.5:1. Here, the company is not able to attain
the ideal ratio. That means the company’s financial position is not sound.

Figure 4.5 Proprietary Ratio

0.5

0.4

0.3

0.2
ratio
0.1

0
2015-2016
2016-2017 ratio
2017-2018
2018-2019
2019-2020

25
4.3.3 Solvency Ratio

Solvency Ratio = Total Asset/Total Debt

Table 4.6 Showing Solvency Ratio

Total Asset (Rs.in Total Debt(Rs.in

Year Ratio
cr) cr)

2015-2016 6805.97 1665.85 4.08

2016-2017 7362.59 1527.85 4.81

2017-2018 8088.08 1890.09 4.27

2018-2019 7058.20 2200.65 3.20

2019-2020 7899.73 2524.27 3.12

(Sources-complied Annual report)

If the ratio is more than one it is treated as satisfactory. Here, the company
shows higher ratio than the satisfactory ratio which indicates the solvency and
financial position are strong.

Figure 4.6 Solvency Ratio

5
4
3
2
ratio
1
0
2015-2016
2016-2017 ratio
2017-2018
2018-2019
2019-2020

26
4.3.4Fixed Asset To Networth Ratio

Fixed asset to networth ratio = fixed asset/total shareholders fund

Table 4.7 Showing Fixed Asset To Networth Ratio

Total
Fixed Asset(Rs.in
Year Shareholders Ratio
cr)
Fund(Rs.in cr)

2015-2016 2917.63 3013.70 0.96

2016-2017 2710.34 3420.59 0.79

2017-2018 2505.82 3673.74 0.68

2018-2019 2370.01 1932.26 1.22

2019-2020 2817.99 2019.34 1.39

(sources-complied Annual report)

Ideal ratio of fixed asset to net worth ratio is 0.50. Here, the ratio obtained are
above the ideal ratio. Higher would indicate a risk because the company would
be vulnerable to any unexpected events or changes to the business.

Figure 4.7 Fixed Asset To Networth Ratio

1.4
1.2
1
0.8
0.6
0.4 ratio
0.2
0
2015-2016
2016-2017 ratio
2017-2018
2018-2019
2019-2020

27
4.3 Profitability Ratio

4.3.1 Return On Equity

Return on equity= profit after tax/average equity share capital

Table 4.8 Showing Return on equity

Average equity
Profit after t(Rs.in
Year sharecapital Ratio
cr)
(Rs.in cr)

2015-2016 926.54 96.42 9.60

2016-2017 1225.19 96.42 12.70

2017-2018 1606.93 96.42 16.66

2018-2019 1969.55 96.42 20.42

2019-2020 2082.43 96.42 21.59

(Sources-complied Annual report)

ROE measures how efficiently a firm can use the money from shareholders to
generate profit and growth of the company. Always a high return on equity is
better for every company. 20% is the ideal ratio of return on equity. Here the
ratio shows a higher.

Figure 4.8 Return On Equity

2015-2016
2016-2017
2017-2018
2018-2019
2019-2020

28
4.3.3 Net Profit Ratio

Net profit ratio= net profit/revenue from operations*100

Table 4.9 Showing Net Profit Ratio

Revenue From
Net Profit (Rs.in
Year Operations Ratio
cr)
(Rs.in cr)
2015-2016 926.54 9373.19 9.88

2016-2017 1225.19 10186.52 12.02

2017-2018 1606.93 11551.19 13.91

2018-2019 1969.55 12615.78 15.61

2019-2020 2082.43 13495.88 15.43

(Sources-complied Annual report)

Net profit ratio shows how effectively cost control strategies are implemented
by the management. Net profit ratio is at 9.88 in the year 2016 and for the next
three years it shows an increasing trend that is 12.02, 13.91 and 15.61 .But the
next year the gross profit trend to a small decrease in 2020 that is 15.43.

Figure 4.9 Net Profit Ratio

16
14
12
10
8 ratio
6
4
2
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020

29
4.4 Activity Ratio
Activity ratio measures how effectively a company is able to generate revenue
in the form of cash and sales by using its assets, liability and capital.

4.4.1 Total Asset Turnover Ratio

Total asset turnover ratio =sales/total asset

Table 4.10 Showing Total Asset Turnover Ratio

Total Asset(Rs.in
Year Sales(Rs.in cr) Ratio
cr)
2015-2016 9159.28 6805.97 1.34

2016-2017 9952.53 7362.59 1.35

2017-2018 11216.23 8088.08 1.38

2018-2019 12295.27 7058.20 1.74

2019-2020 13290.16 7899.73 1.68

(Sources-complied Annual report)

Total asset turnover ratio means how efficiently a firm uses its goods to
generate sales. Here we can see the ratios are above the standard which means
that the company is more efficient in generating revenue from its assets.

Figure 4.10 Total Asset Turnover Ratio

2
1.8
1.6
1.4
1.2
1
ratio
0.8
0.6
0.4
0.2
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020

30
4.4.2 Fixed Asset Turnover Ratio

Fixed asset turnover ratio = sales/fixed asset

Table 4.11 Showing Fixed Turnover Ratio

Fixed Asset(Rs.in
Year Sales(Rs.in cr) Ratio
cr)
2015-2016 9159.28 2917.63 3.13

2016-2017 9952.53 2710.34 3.67

2017-2018 11216.23 2505.82 4.47

2018-2019 12295.27 2370.01 5.18

2019-2020 13290.16 2817.99 4.71

(sources-complied Annual report)

Fixed asset turnover ratio measures the efficiency with which the firm has been
using its fixed asset to generate sales. Higher fixed asset turnover ratio often
indicates that a firm effectively and efficiently uses its assets to generate
revenues.

Figure 4.11 Fixed Asset Turnover Ratio

6
5
4
3
2 ratio
1
0
2015-2016
2016-2017 ratio
2017-2018
2018-2019
2019-2020

31
4.4.3 Current Asset Turnover Ratio

Current asset turnover ratio =sales/current asset

Table 4.12 Showing Current Asset Turnover Ratio

Current
Year Sales(Rs.in cr) Ratio
Asset(Rs.in cr)

2015-2016 9159.28 3278.99 2.79

2016-2017 9952.53 3937.39 2.52

2017-2018 11216.23 4736.95 2.36

2018-2019 12295.27 3817.17 3.22

2019-2020 13290.16 4185.08 3.17

(sources-complied Annual report)

Current asset turnover ratio shows how well the current asset of the
company is utilized. The current asset turnover ratio increases from 2016-
2016 to 2018-2019 and it falls to 3.17 in 2019-2020.

Figure 4.12 Current Asset Turnover Ratio

4
3
2
1 ratio
0
2015-2016
2016-2017
2017-2018
2018-2019
2019-2020

32
4.4.4 Working Capital Turnover Ratio

Working Capital turnover ratio = revenue from operation/net working

capital

Table 4.13 Showing Working Capital Turnover Ratio.

Revenue from
Net working
Year Operations(Rs.in Ratio
Capital(Rs.in cr)
cr)

2015 - 2016 9373.19 1646.29 5.69

2016-2017 10186.52 2444.68 4.16

2017-2018 11551.19 2882.00 4.00

2018-2019 12615.78 1669.66 7.55

2019-2020 13495.88 1692.53 7.97

(sources-complied Annual report)

Working capital turnover ratio shows how efficiently a firm uses its working
capital. Always a high working capital ratio preferred by every company. Here
the smallest ratio was obtained by the company in the year 2017-2018 which
was 4.00 but after the year ratio started increasing to 7.55 and 7.97 in 2019-
2020.

Figure 4.13 Working Capital Turnover Ratio

10
8
6
4
2
0
2015-2016 2016-207 2017-2018 2018-2019 2019-2020

33
 4.4.5 Stock Turnover Ratio

Stock turnover ratio =revenue from operation/average inventory

Table 4.14 Showing Stock Turnover Ratio

Revenue from Average

Year operations(Rs.in inventory(Rs.in Ratio
cr) cr)

2015-2016 9373.19 881.99 10.63

2016-2017 10186.52 922.82 11.03

2017-2018 11551.19 934.01 12.37

2018-2019 12615.78 1124.31 11.22

2019-2020 13495.88 1349.77 9.99

(sources-complied Annual report)

Stock turnover ratio measures how efficiently a company can control its
merchandise. Always a high ratio is suitable to have for a company. In the
present study the stock turnover ratio is increasing and decreasing in each
period. In 2016-2017 it was 11.03 and then in 2017-2018 it increase to 12.37.

Figure 4.14 Stock Turnover Ratio

14
12
10
8
6
4 ratio
2
0
2015-2016
2016-2017 ratio
2017-2018
2018-2019

34
 4.5 Comparative Balance Sheet Analysis

Table 4.15 Comparative Balance Sheet Of 2015-2016 And 2016-2017

Particulars 2015-2016 2016-2017 Increase/Decrease Percentage

I. Equity and
Liabilities
Shareholders
3013.70 3420.59 406.89 13.50
Fund
Non-current
2159.57 2449.29 289.72 13.41
Liability

Current
1632.70 1492.71 -139.99 -8.57
Liability

TOTAL 6805.97 7362.59 556.62 8.17

II. Asset

Non-current
Asset
a. Tangible
2917.63 2710.34 -207.29 -7.10
Asset
b. Non-
current 609.35 714.86 105.51 17.31
Investment

Current Asset 3278.99 3937.39 658.4 20.07

TOTAL 6805.97 7362.59 556.62 8.17

(Sources-Compiled from Annual Report)

During the financial year 2016-17 the company balance sheet shows an
increase in current asset by 20.07%. The current liability and tangible asset
shows a decrease by 8.57% and 7.10% respectively.

35
 Table 4.16 Comparative Balance Sheet Of 2016-2017 And 2017-2018

Particulars 2016-2017 2017-2018 Increase/Decrease Percentage

I. Equity and
Liabilities

Shareholders
3420.59 3673.74 253.15 7.40
Fund

Non-current
2449.29 2559.39 110.1 4.49
Liability

Current
1492.71 1854.95 362.24 24.26
Liability

TOTAL 7362.59 8088.08 725.49 9.85

II. Asset

Non-current
Asset

a. Tangible
2710.34 2505.82 -204.52 -7.54
Asset
b. Non-
current 714.86 845.31 130.45 18.24
Investment

Current Asset 3937.39 4736.95 799.56 20.30

TOTAL 7362.59 8088.08 725.49 9.85

(Sources-Compiled from Annual Report)

During the financial year 2017-18 the company balance sheet shows an
increasing trend. Current asset shows an increase of 20.30% and current
liability also show an increase of 24.26%

36
 Table 4.17 Comparative Balance Sheet Of 2017-2018 And 2018-2019

Particulars 2017-2018 2018-2019 Increase/Decrease Percentage

I. Equity and
Liabilities

Shareholders
3673.74 1932.26 -1741.48 -47.40
Fund

Non-current
2559.39 2978.43 419.04 16.37
Liability

Current
1854.95 2147.51 292.56 15.77
Liability

TOTAL 8088.08 7058.20 -1029.88 -12.73

II. Asset

Non-current
Asset

a. Tangible
2505.82 2370.01 -135.81 -5.41
Asset
b. Non-
current 845.31 871.02 25.71 3.04
Investment

Current Asset 4736.95 3817.17 -919.78 -19.41

TOTAL 8088.08 7058.20 -1029.88 -12.73

(Sources-Compiled from Annual Report)

During the financial year 2018-19 the company balance sheet shows an
decreasing trend compared to the previous year. The current asset decrease of
19.41%.

37
 Table 4.18 Comparative Balance Sheet Of 2018-2019 And 2019-2020

Particulars 2018-2019 2019-2020 Increase/Decrease Percentage

I. Equity and
Liabilities

Shareholders
1932.26 2019.34 87.08 4.50
Fund

Non-current
2978.43 3387.84 409.41 13.74
Liability

Current
2147.51 2492.55 345.04 16.06
Liability

TOTAL 7058.20 7899.73 841.53 11.92

II. Asset

Non-current
Asset

a. Tangible
2370.01 2817.99 447.98 18.90
Asset
b. Non-
current 871.02 896.66 25.64 2.94
Investment

Current Asset 3817.17 4185.08 367.91 9.63

TOTAL 7058.20 7899.73 841.53 11.92

(Sources-Compiled from Annual Report)

During the financial year 2019-20 the company’s balance sheet shows an
increasing trend as compared to the previous financial year and all items in
equity and liability and asset has been increased.

38
 CHAPTER 5
FINDINGS, SUGGESTIONS AND
CONCLUSION
 FINDINGS, SUGGESTIONS AND CONCLUSION

5.1 Findings
The major findings of the study are:

 Current ratio is below the ideal ratio 2:1 in the last two years that is
2019 (1.77%) and in 2020 (1.67%)
 In absolute liquidity ratio the ideal ratio is 0.5:1.The company follows
the absolute liquidty ratio is satisfactory during the period of the study.
 Company shows less than the standard ratio of 1:1 in liquid ratio which
means company is not in a position to pay off its current liabilities
 In solvency ratio the company’s debt equity is below the standard of
1:1. This means the company able to manage its outside earnings
 Company is not in a financial position to manage their shareholders fund
and total assets
 The company’s solvency position is strong as they have sufficient total
asset to meet its debt.
 In fixed asset to networth ratio the company follows the ideal ratio 0.50
during the entire period of study. Company is able to make changes in
the business
 According to profitability ratio, in return on equity firm can use the
money from shareholders to generate profit and growth of the company.
20% is the ideal ratio. Nestle India ltd shows high growth on return on
equity
 Net profit ratio shows a fluctuating trend in the past five years. Lowest
ratio obtained in the year 2015-2016
 According to total asset turnover ratio the company is more efficient in
generating revenue from its assets
 In working capital ratio lowest ratio obtained in the year 2017-2018 and
the highest ratio in the year 2019-2020
 Stock turnover ratio measures how efficiently company can control its
merchandise. It shows a fluctuating trend in the study.
 The comparative balance sheet of last year 2019-20 shows an increasing
trend compared to the previous years and all the items equity and
liability and asset also increased.

39
5.2 Suggestions

 The profitability position of the company can be utilized in a better or

other effective purpose.
 It is advisable to take more efforts to increase the overall efficiency of
the business.
 Fluctuations in the ratio shows that there are some kind of management
problems or production problems that exist in Nestle ltd., the top
management should take necessary steps to assemble the management
and workers in best way.
 They should have good systematic plan on utilization of the resources
provided to them and should use its available resources to its best.
 Company has to value its product which should be convenient to the
public. The pricing strategies should be in such a way that it should be
affordable to all kinds of customers.
 The company has to show an increasing trend in its net profit and it
should be maintained.
 The company should try to increase the value of goodwill that the
company possess.

5.3 Conclusion
Nestle ltd.is one of the growing private sector company in the world. The
company shows a fluctuating trend in its financial position over the years. A
steady increase cannot be seen but also it never moves to a loss making
situation. Managerial issues and the pandemic year may be the reason for the
fluctuations. The company is trying to solve these issues but hasn’t reached in
its fullest. More effort should be given to protect the smooth functioning of the
company. It can be concluded that companies liquidity and solvency position is
satisfactory and at the same time the company needs to improve its profitability
position.

40
BIBLIOGRAPHY
Books

 A study on financial analysis of Maruti Suzuki India limited

company.(2017). ISOR Journal of Business and Management, 19(7).
93-101.
 Lata,S., & Anand, D.(2017). In International Conference on Recent
Innovation in Science, Agriculural, Engineering and Management and
Management ,Punjab.
 Jayawardhana, A. (2016). Financial performance Analysis of Adidas
AG.European Journal of Business And Management, 8(11).
 Subramanian,M(2016). A study on Financial Performance Analysis of
Force Motors Limited. International Journal For innovative Research In
Science And Technology
 Harpert(2016),”A study on the qualities&quantities of Maruti
Suzuki,”IOSR Journal of business and Management,16(6),pp.83-89
 Khan, I. (2016). Britannia analysis of financial performance. Retrieved
from http://www.slideshare.net/ImranKhan994/britannia-analysis-of-
financial-performance
 Anu.B (2015),”A study on capital structure of selected automobile
industries in India,”EPRA International journal of economic and
Business review,3(5),pp.145-150
 Krishna M & Vidhya R. (2015),”A study on liquidity Analysis of Indian
Aotumobile industry,Asian Research Journal of business
Management.(2),pp.24-30
 Kumar (2015). ITC Financial Report. Retrieved
fromhttps://www.sildeshare.net/kumar/itc-financial-report
 Shenda vikram(2014),” An overview of the financial performance of
Indian tire industry-comparison among leading companies.”Innovative
journal of Business and Management

JOURNALS

 BSE annual report

 Nestle India limited annual report
WEBSITES

 www.moneycontrol.com
 www.nestle.com
 www.wikipedia.com\
ANNEXURE
BALANCE SHEET OF DEC 20 DEC 19 DEC 18 DEC 17 DEC 16
NESTLE INDIA (in Rs. Cr.)

12 mths 12 mths 12 mths 12 mths 12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 96.42 96.42 96.42 96.42 96.42

TOTAL SHARE CAPITAL 96.42 96.42 96.42 96.42 96.42

Reserves and Surplus 1,922.92 1,835.84 3,577.32 3,324.17 2,917.28

TOTAL RESERVES AND 1,922.92 1,835.84 3,577.32 3,324.17 2,917.28

SURPLUS

TOTAL SHAREHOLDERS 2,019.34 1,932.26 3,673.74 3,420.59 3,013.70

FUNDS

NON-CURRENT
LIABILITIES

Long Term Borrowings 31.72 53.14 35.14 35.14 33.15

Deferred Tax Liabilities [Net] 0.00 17.95 58.82 121.96 154.21

Other Long Term Liabilities 87.85 0.43 0.51 0.60 0.00

Long Term Provisions 3,268.27 2,906.91 2,464.92 2,291.59 1,972.21

TOTAL NON-CURRENT 3,387.84 2,978.43 2,559.39 2,449.29 2,159.57

LIABILITIES

CURRENT LIABILITIES

Short Term Borrowings 3.12 0.00 0.00 0.00 0.00

Trade Payables 1,516.58 1,494.69 1,240.37 984.64 799.16

Other Current Liabilities 866.89 567.36 457.32 420.61 512.84

Short Term Provisions 105.96 85.46 157.26 87.46 320.70

TOTAL CURRENT 2,492.55 2,147.51 1,854.95 1,492.71 1,632.70

LIABILITIES

TOTAL CAPITAL AND 7,899.73 7,058.20 8,088.08 7,362.59 6,805.97

LIABILITIES

ASSETS

NON-CURRENT ASSETS

Tangible Assets 2,817.99 2,226.71 2,400.62 2,616.18 2,729.46

Intangible Assets 0.00 0.00 0.00 0.00 0.00

Capital Work-In-Progress 0.00 143.30 105.20 94.16 188.17

Other Assets 0.00 0.00 0.00 0.00 0.00

FIXED ASSETS 2,817.99 2,370.01 2,505.82 2,710.34 2,917.63

Non-Current Investments 740.83 743.60 733.36 585.28 474.31

Deferred Tax Assets [Net] 19.92 0.00 0.00 0.00 0.00

Long Term Loans And 46.55 46.98 40.14 46.35 135.04

Advances

Other Non-Current Assets 89.36 80.44 71.81 83.23 0.00

TOTAL NON-CURRENT 3,714.65 3,241.03 3,351.13 3,425.20 3,526.98

ASSETS

CURRENT ASSETS

Current Investments 722.94 1,007.45 1,925.13 1,393.59 1,275.04

Inventories 1,416.48 1,283.07 965.55 902.47 943.18

Trade Receivables 164.93 124.33 124.59 88.97 97.93

Cash And Cash Equivalents 1,769.87 1,308.05 1,610.06 1,457.42 880.00

Short Term Loans And 13.22 12.46 17.89 28.80 57.02

Advances

OtherCurrentAssets 97.64 81.81 93.73 66.14 25.82

TOTAL CURRENT ASSETS 4,185.08 3,817.17 4,736.95 3,937.39 3,278.99

TOTAL ASSETS 7,899.73 7,058.20 8,088.08 7,362.59 6,805.97

OTHER ADDITIONAL
INFORMATION

CONTINGENT LIABILITIES,
COMMITMENTS

Contingent Liabilities 0.00 394.48 47.91 32.24 81.44

CIF VALUE OF IMPORTS

Raw Materials 0.00 0.00 0.00 0.00 291.91

Stores, Spares And Loose 0.00 0.00 0.00 0.00 46.21

Tools

Trade/Other Goods 0.00 0.00 0.00 0.00 46.21

Capital Goods 0.00 0.00 0.00 0.00 77.16

EXPENDITURE IN FOREIGN
EXCHANGE

Expenditure In Foreign 0.00 2,942.95 1,717.13 0.00 476.95

Currency

REMITTANCES IN
FOREIGN CURRENCIES
FOR DIVIDENDS

Dividend Remittance In -- -- -- -- 354.01

Foreign Currency

EARNINGS IN FOREIGN
EXCHANGE

FOB Value Of Goods -- 638.48 708.69 -- 477.32

Other Earnings -- -- -- -- 178.40

BONUS DETAILS

Bonus Equity Share Capital 0.00 73.41 73.41 73.41 73.41

NON-CURRENT
INVESTMENTS

Non-Current Investments -- 765.58 727.81 589.32 478.76

Quoted Market Value

Non-Current Investments -- -- -- -- 51.88

Unquoted Book Value

CURRENT INVESTMENTS

Current Investments Quoted -- 1,007.39 1,925.13 1,393.46 1,281.13

Market Value

Current Investments -- -- -- -- --
Unquoted Book Value

Source : Dion Global Solutions Limited

PROFIT & LOSS DEC 20 DEC 19 DEC 18 DEC 17 DEC 16
ACCOUNT OF NESTLE
INDIA (in Rs. Cr.)

12 mths 12 mths 12 mths 12 mths 12 mths

INCOME

REVENUE FROM 13,290.16 12,295.27 11,216.23 10,135.11 9,491.72

OPERATIONS [GROSS]

Less: Excise/Sevice 0.00 0.00 0.00 182.58 332.44

Tax/Other Levies

REVENUE FROM 13,290.16 12,295.27 11,216.23 9,952.53 9,159.28

OPERATIONS [NET]

TOTAL OPERATING 13,350.03 12,368.90 11,292.27 10,009.60 9,223.80

REVENUES

Other Income 145.85 246.88 258.92 176.92 149.39

TOTAL REVENUE 13,495.88 12,615.78 11,551.19 10,186.52 9,373.19

EXPENSES

Cost Of Materials 5,554.24 5,150.30 4,365.68 4,231.66 3,775.09

Consumed

Operating And Direct 0.00 0.00 0.00 0.00 0.00

Expenses

Changes In Inventories -69.33 -144.19 -6.01 -79.56 -10.78

Of FG,WIP And Stock-In
Trade

Employee Benefit 1,500.95 1,262.95 1,124.15 1,017.45 1,073.36

Expenses

Finance Costs 164.18 119.83 111.95 91.90 3.51

Depreciation And 370.38 316.36 335.67 342.25 353.62

Amortisation Expenses

Other Expenses 2,959.70 2,992.85 2,856.56 2,481.11 2,379.03

TOTAL EXPENSES 10,683.09 9,940.79 9,122.24 8,347.22 7,869.51

PROFIT/LOSS BEFORE 2,812.79 2,674.99 2,428.95 1,839.30 1,503.68
EXCEPTIONAL,
EXTRAORDINARY
ITEMS AND TAX

Exceptional Items 0.00 0.00 0.00 0.00 -62.14

PROFIT/LOSS BEFORE 2,812.79 2,674.99 2,428.95 1,839.30 1,441.54

TAX

TAX EXPENSES-
CONTINUED
OPERATIONS

Current Tax 730.36 747.00 884.87 649.17 533.71

Less: MAT Credit 0.00 0.00 0.00 0.00 0.00

Entitlement

Deferred Tax 0.00 -41.56 -62.85 -35.06 -18.71

Tax For Earlier Years 0.00 0.00 0.00 0.00 0.00

TOTAL TAX 730.36 705.44 822.02 614.11 515.00

EXPENSES

PROFIT/LOSS AFTER 2,082.43 1,969.55 1,606.93 1,225.19 926.54

TAX AND BEFORE
EXTRAORDINARY
ITEMS

PROFIT/LOSS FROM 2,082.43 1,969.55 1,606.93 1,225.19 926.54

CONTINUING
OPERATIONS

PROFIT/LOSS FOR 2,082.43 1,969.55 1,606.93 1,225.19 926.54

THE PERIOD

OTHER ADDITIONAL
INFORMATION

EARNINGS PER
SHARE

Basic EPS (Rs.) 215.98 204.28 166.67 127.07 96.10

Diluted EPS (Rs.) 215.98 204.28 166.67 127.07 96.10

VALUE OF IMPORTED
AND INDIGENIOUS
RAW MATERIALS
STORES, SPARES AND
LOOSE TOOLS

Imported Raw Materials 0.00 0.00 0.00 0.00 360.98

Indigenous Raw 0.00 0.00 0.00 0.00 2,750.90

Materials

STORES, SPARES AND

LOOSE TOOLS

Imported Stores And 0.00 0.00 0.00 0.00 10.44

Spares

Indigenous Stores And 0.00 0.00 0.00 0.00 79.06

Spares

DIVIDEND AND
DIVIDEND
PERCENTAGE

Equity Share Dividend 0.00 2,950.32 1,089.50 829.18 607.42

Tax On Dividend 0.00 605.94 223.87 168.77 123.66

Equity Dividend Rate (%) 1,350.00 3,420.00 1,150.00 860.00 630.00

Source : Dion Global Solutions Limited