Financial Accounting

Assignment

Analysis of Financial Statements of Cadbury India Ltd and

Nestle India Ltd for year ending on 31st December 2008

Submitted by

Aniket Deshpande, 31064

Ankit Saxena, 31065
Raj Kumar,31098
Index

 Cadburys India Ltd.

o Overview……………………………………………………………………….2
o Financial Statements as per 31st Dec 2008
 Balance Sheet……………………………………………………….3
 Profit and Loss Account…………………………………………4

 Nestle India Ltd.

o Overview……………………………………………………………………….5
o Financial Statements as per 31st Dec 2008
 Balance Sheet……………………………………………………….6
 Profit and Loss Account…………………………………………7
 Financial Ratios……………………………………………………………………..8

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Cadbury India Ltd.
Overview
Cadbury India is a fully owned subsidy of Kraft Foods Inc. The combination of Kraft Foods and
Cadbury creates a global powerhouse in snacks, confectionery and quick meals. It is currently
the world's No.1 confectionery and biscuit company. Cadbury is also the world’s second-largest
food company with sales in approximately 160 countries. Cadbury India is a fully owned subsidy
of Kraft Foods Inc. The combination of Kraft Foods and Cadbury creates a global powerhouse in
snacks, confectionery and quick meals. 
With annual revenues of approximately $50 billion, the combined company is the world's second
largest food company, making delicious products for billions of consumers in more than 160
countries. We employ approximately 140,000 people and have operations in more than 70
countries. 

Cadbury enjoys a value market share of over 70% - the highest Cadbury brand share in the
world! Cadbury’s billion-dollar brand Cadbury Dairy Milk is considered the "gold standard" for
chocolates in India. The pure taste of CDM defines the chocolate taste for the Indian consumer. 
In the Milk Food drinks segment our main product is Bournvita - the leading Malted Food Drink
(MFD) in the country. Similarly in the medicated candy category Halls is the undisputed leader.
In India, Cadbury began its operations in 1948 by importing chocolates. After 60 years of
existence, it today has five company-owned manufacturing facilities at Thane, Induri (Pune) and
Malanpur (Gwalior), Bangalore and Baddi (Himachal Pradesh) and 4 sales offices (New Delhi,
Mumbai, Kolkota and Chennai). The corporate office is in Mumbai. 
Since 1965 Cadbury has also pioneered the development of cocoa cultivation in India. For over
two decades, we have worked with the Kerala Agriculture University to undertake cocoa
research and released clones, hybrids that improve the cocoa yield. Our Cocoa team visits
farmers and advise them on the cultivation aspects from planting to harvesting. We also conduct
farmers meetings & seminars to educate them on Cocoa cultivation aspects. Our efforts have
increased cocoa productivity and touched the lives of thousands of farmers. Hardly surprising
then that the Cocoa tree is called the Cadbury tree! 
Today, as a combined company with an unmatched portfolio in confectionery, snacking and
quick meals, we are poised in our leap towards quantum growth. We are the world's No.1
Confectionery Company. And we will continue to “make today delicious”! 

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Financial Statements
 Balance Sheet as on 31st December 2008

Particulars Amount (in Million Rs)

    Equity Capital 321.83
    Preference Capital 0.00
Share Capital 321.83
Reserves and Surplus 4322.20
Loan Funds 417.03
    Current Liabilities 4291.79
    Provisions 203.96
Current Liabilities and Provisions 4495.75
Total Liabilities and Stockholders’ Equity  9280.43
    Tangible Assets Net 2513.89
    Intangible Assets Net 0.00
  Net Block 2513.89
  Capital Work In Progress Net 1238.65
Fixed Assets 3752.54
Investments 29.24
  Inventories 2228.05
  Accounts Receivable 196.75
  Cash and Cash Equivalents 2695.90
  Other Current Assets 43.54
Current Assets 5164.24
Loans & Advances 654.62
Miscellaneous Expenditure Other Assets 0.00
Total Assets  9600.64

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  Profit and Loss Account as on 31st December 2008

Particulars Amount (In Million Rs)

   Net Sales  15885.95
   Material Cost 7309.63
   Increase Decrease Inventories -513.19
   Personnel Expenses 1302.20
   Manufacturing Expenses 798.13
Gross Profit 6989.18
   Administration Selling and Distribution Expenses 4803.67
EBITDA 2185.51
   Depreciation Depletion and Amortization 365.22
EBIT 1820.29
   Interest Expense 52.04
   Other Income 250.65
Pretax Income 2018.90
   Provision for Tax 361.07
   Extra Ordinary and Prior Period Items Net 0.00
Net Profit 1657.85
Adjusted Net Profit 1657.85
Dividend - Preference 0.00
Dividend - Equity 0.00

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Nestle India Ltd.
Nestlé India is a subsidiary of Nestlé S.A. of Switzerland. With seven factories and a large
number of co-packers, Nestlé India is a vibrant Company providing consumers in India with
products of global standards committed to long-term sustainable growth and shareholder
satisfaction.

After India’s independence in 1947, the economic policies of the Indian Government emphasized
the need for local production. Nestlé responded to India’s aspirations by forming a company in
India and set up its first factory in 1961 at Moga, Punjab, where the Government wanted Nestlé
to develop the milk economy. Progress in Moga required the introduction of Nestlé’s
Agricultural Services to educate advice and help the farmer in a variety of aspects. From
increasing the milk yield of their cows through improved dairy farming methods, to irrigation,
scientific crop management practices and helping with the procurement of bank loans. Nestlé
set up milk collection centers that would not only ensure prompt collection and pay fair prices,
but also instill amongst the community, a confidence in the dairy business. Progress involved the
creation of prosperity on an on-going and sustainable basis that has resulted in not just the
transformation of Moga into a prosperous and vibrant milk district today, but a thriving hub of
industrial activity, as well.
Nestlé has been a partner in India's growth for over nine decades now and has built a very
special relationship of trust and commitment with the people of India. The Company's activities
in India have facilitated direct and indirect employment and provides livelihood to about one
million people including farmers, suppliers of packaging materials, services and other goods. The
Company continuously focuses its efforts to better understand the changing lifestyles of India
and anticipate consumer needs in order to provide Taste, Nutrition, Health and Wellness
through its product offerings. The culture of innovation and renovation within the Company and
access to the Nestlé Group's proprietary technology/Brands expertise and the extensive
centralized Research and Development facilities gives it a distinct advantage in these efforts. It
helps the Company to create value that can be sustained over the long term by offering
consumers a wide variety of high quality, safe food products at affordable prices. 
Nestlé India manufactures products under internationally famous brand names such as
NESCAFÉ, MAGGI, MILKYBAR, MILO, KIT KAT, BAR-ONE, MILKMAID and NESTEA and in recent
years the Company has also introduced products of daily consumption and use such as NESTLÉ
Milk, NESTLÉ SLIM Milk, NESTLÉ Fresh 'n' Natural Dahi and NESTLÉ Jeera Raita.

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Financial Statements
 Balance Sheet as on 31st December 2008

Particulars Amount (in Million Rs)

    Equity Capital 964.16
    Preference Capital 0.00
Share Capital 964.16
Reserves and Surplus 3769.34
Loan Funds 0.00
    Current Liabilities 5074.67
    Provisions 6773.16
Current Liabilities and Provisions 11847.83
Total Liabilities and Stockholders’ Equity  16950.14
    Tangible Assets Net 7386.92
    Intangible Assets Net 143.00
  Net Block 7529.92
  Capital Work In Progress Net 1091.69
Fixed Assets 8621.61
Investments 348.99
  Inventories 4349.12
  Accounts Receivable 455.93
  Cash and Cash Equivalents 1936.89
  Other Current Assets 0.00
Current Assets 6741.94
Loans & Advances 1237.59
Miscellaneous Expenditure Other Assets 0.00
Total Assets  16950.14

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  Profit and Loss Account as on 31st December, 2008

Particulars Amount (in Million Rs)

   Net Sales  43242.45
   Material Cost 21036.25
   Increase Decrease Inventories 156.82
   Personnel Expenses 3321.05
   Manufacturing Expenses 4249.16
Gross Profit 14479.17
   Administration Selling and Distribution Expenses 6149.73
EBITDA 8329.44
   Depreciation Depletion and Amortization 923.60
EBIT 7405.84
   Interest Expense 16.43
   Other Income 338.85
Pretax Income 7728.26
   Provision for Tax 2387.45
   Extra Ordinary and Prior Period Items Net 0.00
Net Profit 5340.82
Adjusted Net Profit 5340.82
Dividend - Preference 0.00
Dividend - Equity 4097.67

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Financial Ratios
Cadbury India
Ratio Formula Ltd. Nestle India Ltd.
Gross Profit Ratio (Gross Profit/Sales)*100 44% 32.60%
(Cost of Sales+Operating
Operating Ratio Expenses)/Sales * 100 147.83% 149.09%
       
Expense Ratio Expense /Sales *100 30.56% 14.25%
i) Selling and Distribution
and Administrative
Expenses Ratio Administrative Expenses /Sales *100 30.23% 14.22%
ii)Interest Ratio Interest Expenses/Sales *100 0.32% 0.03%
       
Net Profit(after interest and tax)/Sales
Net Profit Ratio *100 10.4% 12.8%

Return on capital Net Profit/(Share Capital +Reserve +

employed Long term Loans)*100 32.75% 112.82%
Return on Shareholder's Net Profit/(Share Capital
funds +Reserve)*100 35.69% 112.82%

Return on Equity Share (Net Profit-Preference

capital dividend)/Equity Share Capital *100 515.13% 563.26%
(After tax profit-Preference
Dividend)/Number of Equity Shares
Earnings per Share *100 50.6% 55.4%
Current ratio Current Assests/Currrent Liabilities 1.2 1.32
Information not  Information not
Liquid Ratio Liquid Assests/Liquid Liabilities available available
Acid-test Ratio Quick Assests/Liquid Liabilities 0.7 0.5
Proprietary Ratio Proprietor's Fund/Total assests 48.37% 27.92%
Long term Liabilities/Owner's Funds
Debt-Equity Ratio *100 8.90% 0%

Preference Share capital +

Gearing Ratio Debenture /Equity Share Capital  0 0
Long term funds to fixed
assests Long Term Funds/Fixed Assests * 100  11.11% 0
Pofit before interest and
Interest Coverage Ratio taxes/interest  34.97 450.75
Stock Turnover Cost of sales/Average Stock  27.21 6.88 

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 (Debtors'+Bills Receivables)/Credit
Debtors' ratio sale *100  1.24% 1.05% 
Current Liability Current Liability
(creditors +Bills payable )/Credit Breakup not Breakup not
Creditors' Velocity Purchases *365 available available 
Total assests TurnoverSales/Total Assets 165.46% 255.11%
Profit(Available for debt  Amount of Amount of
Debt Service Coverage payment)/(instalment of principal Principle not Principle not
ratio +interest) available available 

Comparative Analysis of
Cadbury India Ltd. and Nestle India Ltd.
 Both companies have a gross profit ratio of more than 30 %. This is a decent percentage
to account for the expenses which will be incurred before the net profit is ascertained.

 The expense ratio is lower for Nestle India Ltd. by almost half the amount. This indicates
the amount of expenses under each head. The lesser the expenses occurred in sales, the
greater the profitability of the company.
 The Net Profit Ratio indicates the profitability of the organization. There is not a major
difference between the two companies chosen as they enjoy duopoly in their specific
markets. Here as well, Nestle being a larger firm is leading the market with a 2 %
advantage over Cadbury.
 Return on Capital employed and Return to shareholder’s funds are the indicators of
profitability from the shareholder’s point of view. This will bring more share capital in the
next year and better capital investments for the future.
 Earnings per share is the individual earning which a shareholder will receive on his
investment in our company. The more the earnings per share, the better for the
company. In our case, there is almost a 50 % increase in both companies which is a great
investment for the shareholders.
 Current Ratio for both the firms is more than 1. This is perfect as the amount of assets
should always be more than the total amount of liabilities for a business.
 The quick asset ratio has been taken as it is from the annual reports of the companies as
there is not break up of the liabilities information available about the companies.
Analyzing the found ratio, it is a good ratio as the amount of quick assets are comparable
to the liquid liabilities.
 The proprietary ratio gives us the percentage of proprietor’s funds involved in the total
funds of the company. This ratio should ideally be higher as it shows a stronger hold of
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 the company. In our companies, Cadbury’s position is stronger as compared to Nestle
when we consider the point of view of the proprietor. For Cadbury, its almost half of the
total funds employed in the business.
 The debt equity ratio should be an optimum value for the business. A higher value would
mean low sustainability of the company and lower value would indicate that external
credit is not being employed in the company. For Nestle, this value is alarmingly low, as it
has not utilized any outside credit which was at its disposition.

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