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Comparison of

Godrej Consumer Products Ltd. & Hindustan Unilever Ltd.


on the basis of their Financials.
A Research Project Report Submitted to
Amity Global Business School, Amity University
for the partial fulfillment of award of degree of

BACHELOR OF BUSINESS ADMINISTRATION


Submitted by: zarquan ali
BBA Sixth Semester
Enrollment Number: A31406413025
Batch: 2013-2016
Guided by: Rohit Kumar
AGBS, Patna
Amity Global Business School, Patna
Amity University
2016

TO WHOM IT MAY CONCERN

This is to certify that the research work entitled Comparison of Godrej


Consumer Products Ltd & Hindustan Unilever Ltd. on the basis of their
Financials. submitted by me for the partial fulfillment of award of Bachelor of
Business Administration at Amity Global Business School, Patna represents
my original work and no part of this thesis has been submitted for any other degree
or diploma.
The assistance and help received during the course of this investigation and
sources of Literature have been duly acknowledged.

Signature of the Candidate


Subham Sonu
BBA Sixth Semester
A31406412025

CERTIFICATE
This is to certify that the research report entitled Comparison of Godrej
Consumer Products Ltd & Hindustan Unilever Ltd. on the basis of their
Financials. being submitted by Subham Sonu, BBA Sixth Semester,
A31406413025 for the partial fulfillment of award of the degree of Bachelor of
Business Administration is a record of bonafide research carried out by him/her.
Subham Sonu has worked under my guidance and supervision for submission of
this thesis, which in my opinion is of requisite standard.
This research work or any part thereof has not been submitted to any other
University or Institute for the award of any other degree or diploma.

Signature of the Guide


Rohit Kumar
Amity Global Business School
Amity University

ACKNOWLEDGEMENT
This research report in its present form is a result of a cohesive team spirit. It bears
the imprints of many people who coagulated to guide and support me. Any fruitful
work is incomplete without a word of thanks to those involved directly or
indirectly in its completion. With my sincere gratitude I would like to thank
everyone who has supported me in this research project.
At the outset, I am indebted to thy God Almighty who empowered me with the
ability to complete this stupendous task.
I express my heartiest gratitude to my Guide respected Rohit Kumar, Amity
Global Business School, Amity University, who spared his precious time and gave
valuable suggestions, which were essential for completion of this research. His
guidance kept me striving to work harder in right direction and did not allow me to
deter from set goals. I am particularly appreciative of his fine efforts in
meticulously & pain staking going through my research report with a Fine tooth
Comp.
I would like to express my heartfelt appreciation & gratitude to Dr. Vivekanand
Pandey, Dean, Amity Global Business School, Patna who kindly extended his
support in the completion of the work.
I would like to express my heartfelt appreciation and gratitude to all faculty
members of Amity Global Business School, Patna, who encouraged me and gave
their invaluable direction throughout the research work.
Further, I owe a great deal to all my teachers who supported me at every step.
A special acknowledgment goes to my parents, sister and brother, who saw me
through all the joys and frustration of this research, while helping me stay focused
on the present. Thank you, for always believing in me and reminding me that the
journey to a goal is one step at a time.
I would also like to place on record my sense of gratitude to friends for their
support and encouragement which has always guided me through my entire work.

Finally, I am thankful to all who helped me directly or indirectly in completion of


this report.
Signature of the Student
Subham Sonu

PREFACE

Introductory Paragraph
The purpose of this research is to do Comparison of Godrej Consumer Products
Ltd. & Hindustan Unilever Ltd. on the basis of their financials. The reason for
selecting Godrej Consumer Products Ltd. and Hindustan Unilever Ltd. is because
both belongs to the Fast Moving Consumer Goods (FMCG) industry and they are
the top performers as well as competitors of each other. In this report, the financial
statements (Balance sheet & Profit & loss account) of both companies of last three
year (2012-2013, 2013-2014, and 2014-2015) are used to compare which
company is performing better and providing a good rate of return to their investors
or shareholders. To do this comparison Ratio analysis, Comparative statement, and
Common size statement are used. Present study has been planned in six chapters.
Chapter 1: Introduction
This chapter includes the sub chapters as following, about the topic, about the
companies, importance of this report to different parties, objectives and limitations
of this report.
Chapter 2: Literature Review
In this chapter what other researcher or author has given their conclusions are
given.
Chapter 3: Research Methodology
A research design is a plan of action to be carried out in connection with research
project. It is the conceptual structure within which research is conducted and it
constitutes the blue print for the collection and analysis of data.
Descriptive Research design is appropriate for this study. Descriptive study is used
to study the situation. This study helps to describe the situation. A detail descriptive
about present and past situation can be found out by the descriptive study. In this
involves the analysis of the situation using the secondary data.
The nature of data which is collected and used for this research is secondary in
nature.

Chapter 4: Data Analysis and Findings


On the basis of balance sheet and profit and loss account statement of both the
companies HUL and GCPL various ratio testing has been done which depict that
HUL is much better in all aspects whether in inventory turnover or liquidity of
assets.
Chapter 5: Suggestion and Recommendations

As we know that ideal current ratio for any firm is 2:1. If we see the current
ratio of the HUL for last three years it has increased from 2012-2013 to
2014-2015. This depicts that companys liquidity position is sound. Its
current assets are more than its current liabilities. While the current ratio of
GCPL for last three 2012-2013 to 2014-2015 is decreased then again
increased which shows that the current liabilities is more than the current
assets.

A quick ratio is an indication that the firm is liquid and has the ability to
meet its current liabilities in time. The ideal quick ratio is 1:1. Both
Companys quick ratio is less than the ideal ratio. This shows both the
company has liquidity problem.

I have great gratification in presenting the research report on the topic


Comparison of Godrej Consumer Products Ltd. & Hindustan Unilever Ltd.
on the basis of their Financials which leads towards the exploration of new
dimensions in the area of research.

Signature of the Student


(Name of the Student)

Contents
Chapter 1: INTRODUCTION............................................................................................. 9
About the topic:.......................................................................................................... 10
Financial Statement:................................................................................................. 10
Financial Statement Analysis:..................................................................................... 10
About the company:.................................................................................................... 11
Godrej Consumer Products Limited:............................................................................. 11
Hindustan Unilever Limited:...................................................................................... 14
Importance of this research:........................................................................................... 16
To company:.......................................................................................................... 16
To investors:........................................................................................................... 16
Creditors:.............................................................................................................. 16
Suppliers of long term debt:........................................................................................ 17
Management:.......................................................................................................... 17
OBJECTIVES:........................................................................................................... 18
Methodology:............................................................................................................ 19
Sources of secondary data:......................................................................................... 19
Limitations:............................................................................................................... 20
Chapter 2: LITERATURE REVIEW................................................................................... 21
Chapter 3: RESEARCH METHODOLOGY.........................................................................23
Research Design:........................................................................................................ 24
Source of Data:.......................................................................................................... 24
Tools & Techniques Used:............................................................................................. 24
Ratio analysis:........................................................................................................ 24
Common size statement:............................................................................................ 27

Comparative statement:............................................................................................. 27
Chapter 4: DATA ANALYSIS & FINDINGS.........................................................................29
BALANCE SHEET OF HUL:........................................................................................ 30
PROFIT & LOSS ACCOUNT OF HUL:...........................................................................31
BALANCE SHEET OF GCPL:...................................................................................... 32
PROFIT & LOSS ACCOUNT OF GCPL:.........................................................................33

Chapter 1: INTRODUCTION

About the topic:


The purpose of this research is to do Comparison of Godrej Consumer Products Ltd. &
Hindustan Unilever Ltd. on the basis of their financials. The reason for selecting Godrej
Consumer Products Ltd. and Hindustan Unilever Ltd. is because both belongs to the Fast Moving
Consumer Goods (FMCG) industry and they are the top performers as well as competitors of
each other. In this report, the financial statements (Balance sheet & Profit & loss account) of both
companies of last three year (2012-2013, 2013-2014, and 2014-2015) are used to compare
which company is performing better and providing a good rate of return to their investors or
shareholders. To do this comparison Ratio analysis, Comparative statement, and Common size
statement are used.

Financial Statement:
The term financial statement is an organized collection of data according to logical and
consistent accounting procedures. Its purpose is to convey an understanding of some financial
aspects of a business firm. It may show assets position at a moment of time as in the case of
balance sheet. Financial statements are broadly grouped in to two statements:
I. Income Statements (Trading, Profit and Loss Account)
II. Balance Sheets

Financial Statement Analysis:


Financial statement analysis is defined as being the process of identifying financial strength and
weakness of a business by establishing relationship between the elements of balance sheet and
income statement. It helps in analyzing the performance of the company, profitability, liquidity,
solvency, and efficiency. Tools of financial statement analysis:
1. Ratio analysis
2. Common size statement
3. Comparative statement

About the company:


Godrej Consumer Products Limited:
Godrej Consumer Products Limited (GCPL) is an
Indian consumer goods company based in Mumbai, India. GCPL's products include soap, hair
colorants, toiletries and liquid detergents. Its brands include 'Cinthol', 'Godrej Fair Glow', 'Godrej
No.1' and 'Godrej Shikakai' in soaps, 'Godrej Powder Hair Dye', 'Renew', 'ColourSoft' in hair
colorants and 'Ezee' liquid detergent. GCPL currently operates several manufacturing facilities in
India spread over seven locations and grouped into 4 Operating Clusters at Malanpur (Madhya
Pradesh), Guwahati (Assam), Baddi- Thana (Himachal Pradesh), Baddi- Katha (Himachal
Pradesh), Pondicherry, Chennai and Sikkim.

History:
The Consumer Products business was part of the erstwhile Godrej Soaps Limited (GSL)
and was demerged into Godrej Consumer Products Limited in April 2001, pursuant to a scheme
of demerger approved by the Honorable High Court of Judicature, Mumbai, dated 14 March
2001.

Business categories:
GCPL operates in the domestic and international markets in the 'Personal and
Household Care' segment. Some of the categories are soaps, hair colorants, toiletries and liquid
detergents. Recently, it made an entry into fast-growing air freshener category by launching a
new fragrance product "aer" in the market.

Competition:

In the soaps category, GCPL brands compete with 'Lux' and 'Lifebuoy'- Hindustan
Unilever Limited, 'Nirma' Nirma.

In the hair colors category, its products compete for market share with 'Black Rose'
Super Vasmol' and 'LOreal'.

Competitors in shaving cream category are 'Gillette', 'Palmolive' and 'Old Spice'.

GCPL's talcum powder brands, compete with 'Ponds'- Hindustan Unilever and 'Denim'.

In the liquid detergent category GCPL brands 'Ezee' and 'Genteel', compete with 'Safe
wash- Wipro' and 'Surf Excel- Hindustan Unilever Limited'.

Sales & distribution network:


GCPL has a widespread distribution network across India. It makes sales in both
urban and rural markets, enabling it to benefit from the opportunities in both segments. It has a
sales team of over 250 staff spread across the country. It has a network of 33 C&F agents and as
on 29 February 2008. It had 1,247 distributors, 142 super stockiest and 3,175 sub stockiest to
support the sales team in India. Its distributors and sub stockiest cover around 650,000 retailers
in India. GCPL has linked its major distributors in India through a system called 'Sampark', a
collaborative planning, forecasting and replenishment system with its ERP system leading to
reduced inventory levels.

Research and development:


GCPL's R&D departments focus on developing new products, standardizing new analytical
methods[clarification needed] and finding cheaper and more abundant alternatives to key raw
materials. Through this research and development center, GCPL continuously interact with
consumers to obtain feedback on its products and information obtained is leveraged to
complement new product development activities.

Products:

Our portfolio of brands includes many household favorites and we are constantly innovating and
looking for new and exciting ways to delight our consumers. Here is a selection of some of our
biggest brands across our three categories - home care, hair care and personal care.

Hindustan Unilever Limited:


Hindustan Unilever Limited (HUL) is an Indian consumer goods company based in Mumbai,
Maharashtra. It is owned by Anglo-Dutch Company Unilever which owns a 67% controlling
share in HUL as of March 2015 and is the holding company of HUL. HUL's products include
foods, beverages, cleaning agents, personal care products and water purifiers.
HUL was established in 1933 as Lever Brothers and, in 1956, became known as Hindustan Lever
Limited, as a result of a merger between Lever Brothers, Hindustan Vanaspati Mfg. Co. Ltd. and
United Traders Ltd. It is headquartered in Mumbai, India and employs over 16,000 workers,
whilst also indirectly helping to facilitate the employment of over 65,000 people. The company
was renamed in June 2007 as "Hindustan Unilever Limited".
Hindustan Unilever's distribution covers over 2 million retail outlets across India directly and its
products are available in over 6.4 million outlets in the country. As per Nielsen market research
data, two out of three Indians use HUL products.

Business categories:
With over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin
care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water
purifiers, the Company is a part of the everyday life of millions of consumers across India. Its
portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair
& Lovely, Ponds, Vaseline, Lakm, Dove, Clinic Plus, Sunsilk, Pepsodent, Close up, Axe,
Brooke Bond, Bru, Knorr, Kissan, Kwality Walls and Pure it.

Competition:

In the soaps category, HUL brands compete with Godrej Consumer Products Limited &
Nirma.

'Ponds'- Hindustan Unilever Limited brands compete with GCPL's talcum powder brands
and 'Denim'.

In the liquid detergent category, Surf Excel- Hindustan Unilever Limited' compete with
'Safe wash- Wipro' and 'GCPL brands 'Ezee' and 'Genteel'.

Direct Selling Division:


HUL also runs Hindustan Unilever Network (HULN), a direct selling business arm. Under
HULN, health products are marketed by Ayush Therapy in collaboration with Arya Vaidya
Pharmacy, Coimbatore; beauty products by Aviance; home products by Lever Home; and male
grooming by D.I.Y. There are also premium products for beauty salons and others.

Products:
We make some of the best-loved brands in the world like Bru, Dove, Kwality Walls, Pure it and
Surf Excel to name just a few. We're one of the biggest FMCG Company in the world.

Importance of this research:


To company:
It helps in understanding that company:
1. Is profitable or not.
2. Has enough money to pay its bills and debts
3. Is using its asset efficiently or not.
4. Able to convert its asset into cash efficiently or not.
5. It helps in locating weakness of the companys operations even though its overall
performance is good.
6. By analyzing the past performance company is able to establish future trends of its
financial performance which will help in formulating the companys future plan.
7. To compare with their competitors.

To investors:
They are most concerned about the firms earnings. They restore more confidence in those firms
that show steady growth in earnings. They concentrate on the analysis of the firms present and
future profitability. They are also interested in the firms financial structure to extent it influences
the firms earnings ability and risk. It helps investors in:
1. Taking decision where to invest.
2. Understanding the business is profitable or not.
3. Comparing the companies in same industry.

Creditors:
They are interested in a firms ability to meet their claims over a very short period of time. Their
analysis will, therefore, confine to the evaluation of the firms liquidity position.

Suppliers of long term debt:


They are concerned with the firms long term solvency and survival. They analyze the firms
profitability over time, its ability to generate cash to be able to pay interest and repay principal,
and the relationship between various sources of funds.

Management:
They are interested in every aspect of the financial analysis. It is their overall responsibility to
see that the resources of the firm are used most effectively and efficiently, and that the firms
financial condition is sound.

OBJECTIVES:
The major objectives of the recent study are to know about financial strengths and weakness of
GCPL & HUL through financial ratio analysis, common size statement, and comparative
statement.
To evaluate the performance of the company by using ratios as a yardstick to measure the
efficiency of the company. To compare the liquidity, profitability, efficiency and solvency
position of the company during the study period. To analyze and evaluates various facts of the
financial performance of the company. To make the comparisons between the ratios of GCPL &
HUL.
1) To study the present financial performance of GCPL & HUL.
2) To determine the profitability, liquidity, activity, solvency, and valuation ratios &

common size and comparative statement.


3) To offer appropriate suggestions for the better performance of the organizations.

Methodology:
The information is collected through secondary sources during the project. That information was
utilized for calculating performance evaluation and based on that interpretations were made.

Sources of secondary data:


Collection of the data is essential part of research. The nature of data
which is collected and used for this research is secondary in nature. The relevant and required
data has been collected from selected companies websites (www.godrejcp.com, www.hul.co.in),
annual reports of GCPL & HUL, books (Financial Management, I M Pandey), and through
various search engines.

Limitations:
1) It is difficult to decide on the proper basis of comparison.
2) The comparison is rendered difficult because of differences in situations of two
companies or of one company over the years.
3) The price level changes make the interpretation of ratios invalid.
4) Standards for comparison
5) Company differences
6) Different definitions of variables
7) Changing situations
8) Historical data

Chapter 2: LITERATURE REVIEW

Literature review:

I M PANDEY in his book, Financial Management on page no. 581, has given different
purpose of financial analysis for different persons connected with the company.
Creditors: They are interested in a firms ability to meet their claims over a very short
period of time. Their analysis will, therefore, confine to the evaluation of the firms
liquidity position.
Suppliers of long term debt: They are concerned with the firms long term solvency and
survival. They analyze the firms profitability over time, its ability to generate cash to be
able to pay interest and repay principal, and the relationship between various sources of
funds.
Investors: They are most concerned about the firms earnings. They restore more
confidence in those firms that show steady growth in earnings. They concentrate on the
analysis of the firms present and future profitability. They are also interested in the firms
financial structure to extent it influences the firms earnings ability and risk
Management: They are interested in every aspect of the financial analysis. It is their
overall responsibility to see that the resources of the firm are used most effectively and
efficiently, and that the firms financial condition is sound.

Kennedy and Muller (1999) in his research article on financial performance he has
pointed that the analysis and Inferences/interpretation of financial Statements are an
attempt to determine the significance and meaning of financial statements data So that the
forecast may be made of the prospects for future earnings, ability to pay interest and Debt
maturates (both current and long term) and profitability and sound dividend policy.

Jonas Elmerraji (2005) in his research article on financial performance he has pointed
that he tries to say that ratios can be an invaluable tool for making an Investment
decision. Even so, many new investors would rather leave their decisions to fate than try
to deal with the intimidation of financial ratios. The truth is that ratios aren't that
intimidating, Even if you don't have a degree in business or finance. Using ratios to make
informed decisions about an investment makes a lot of sense, once you know how use
them.

I.M.Pandey (2007) in his research article on financial performance he has pointed that the
financial statements contain information about the financial consequences and sources
and uses of financial resources, one should be able to say whether the financial condition
of a firm is good or bad; whether it is improving or deteriorating. One can relate the
financial variables given in financial statements in a meaningful way which will suggest
the actions which one may have to initiate to improve the firms financial condition.

Susan Ward (2008) in his research article on financial performance he has pointed that
emphasis that financial analysis using ratios between key values help Investors cope with
the massive amount of numbers in company financial statements. For Example, they can
compute the percentage of net profit a company is generating on the funds it has
deployed. All other things remaining the same, a company that earns a higher percentage
of Profit compared to other companies is a better investment option.

Rachchh Minaxi A (2011), in his research article on financial performance he has pointed
& suggested that the financial statement analysis involves analyzing the financial
statements to extract information that can facilitate decision making. It is the process of
evaluating the relationship between component parts of the financial statements to obtain
a better understanding of an entitys position and performance.

Priyaaks (Mar 2012), in his research article on financial performance he has pointed that
Financial statement analysis is the process of examining relationships among financial
statement elements and making comparisons with relevant information. It is a tool in
decision-making processes related to stocks, bonds, and other financial instruments.

Gupta and Heffner (1972) examined the differences in financial ratio averages between
industries. The Conclusion of both the studies was that differences do exist in mean
profitability, Activity, leverage and liquidity ratios amongst industry groups.

Chapter 3: RESEARCH METHODOLOGY

Research Design:
A research design is a plan of action to be carried out in connection with research project. It is
the conceptual structure within which research is conducted and it constitutes the blue print for
the collection and analysis of data. Or,
A research design is the specification of method and procedure for accruing the information
needed. It is overall operational pattern of frame work of project that stipulates what information
is to be collected for source by that procedures.
Descriptive Research design is appropriate for this study.
Descriptive study is used to study the situation. This study helps to describe the situation. A
detail descriptive about present and past situation can be found out by the descriptive study. In
this involves the analysis of the situation using the secondary data.

Source of Data:
Collection of the data is essential part of research. The nature of data which is collected and used
for this research is secondary in nature. The relevant and required data has been collected from
selected companies websites (www.godrejcp.com, www.hul.co.in), annual reports of GCPL &
HUL, books (Financial Management, I M Pandey), and through various search engines.

Tools & Techniques Used:


Various tools which are going to be used are:

Ratio analysis:
Meaning & definition of ratio analysis:
Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of
ratio to interpret the financial statements so that the strength and weaknesses 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 variables.
Importance of ratio analysis:
1. It helps in evaluating the firms performance:
With the help of ratio analysis
conclusions can be drawn regarding several aspects such as financial health, profitability and
operational efficiency of the undertaking. It points out the operating efficiency of the firm i.e.
whether the management has utilized the firms assets correctly to increase the investors wealth.
It ensures a fair return to its owners and secures optimum utilization of firms assets.
2. It simplifies financial statement:
The information given in the basic financial statements
serves no useful purpose unless it is interpreted and analyzed in some comparable terms. It is one
of the tools in hands of those who want to know more from the financial statements in the
simplified manner.
3. It helps in determining the financial position of the concern:
It facilitates the management to know whether the
firms financial position is improving or deteriorating or constant over the years by setting a
trend with the help of ratios.
4. It is helpful in budgeting and forecasting:
Accounting ratio provide a reliable data, which can
be compared, studied and analyzed. These ratio provide sound footing for future prospects. The
ratios can also serve as a basis for preparing budgeting future line of action.
5. It is helpful in determining liquidity position:
With the help of ratio analysis conclusions can be
drawn regarding the liquidity position of a firm. The liquidity position of a firm would be

satisfactory if it is able to meet its current obligation when they become due. The ability to meet
short term liabilities is reflected in the liquidity ratio of a firm.

6. It is helpful in determining long term solvency:


The long term solvency is measured by the
leverage or capital structure and profitability ratio which shows the earning power and operating
efficiency. Solvency ratio shows the relationship between total liability and total assets.

Classification of ratios:
Accounting ratio may be broadly classified into following categories:
1) Balance sheet ratio:
Ratios calculated from the different items of the Balance sheet of a
concern are called Balance sheet ratios. E.g. Current ratio, Liquid ratio, Debt Equity ratio etc.
2) Revenue statement ratio:
Ratios calculated from the different items of the P & L account of
a concern are called Revenue statement ratios. E.g. Gross profit ratio, Net profit ratio, Stock
turnover ratio etc.
3) Mixed ratio:
Ratios computed taking accounting data from the balance sheet on the one
side and from the P&L account on the other, are called mixed ratios. E.g. Inventory turnover
ratio, working capital ratio etc.

Common size statement:


Under this method, financial statements are analyzed to measure the relationship of various
figures with some common base. While preparing the common size profit & loss account, total
sales is taken as common base and other items are expressed as a percentage of sales. Like this in
order to prepare common size balance sheet, the total assets and total liabilities are taken as
common base and all other items are expressed as a percentage of total assets and liabilities.
Importance:
Analysis of financial statement with the help of common size statement is more useful. Because
of the financial statements of different firms can be converted into uniform common size format
irrespective of the size of individual items.
It establishes the relationship between sales and other items of income statement and this
relationship is helpful in evaluating operational activities of a firm. Whereas, a common size
balance sheet is very useful for comparing the profitability and financial position of two or more
firms.

Comparative statement:
Under this form of comparative financial statement both the comparative profit & loss account
and comparative balance sheet are covered. Such comparative statements are prepared not only
to the comparison of various figures of two or more period but also the relationship between
various elements embodied in profit & loss account and balance sheet.
Objective of comparative statement:
1) To measure the financial position of a firm.
2) To analyze different items of assets and liabilities in absolute rupees i.e. balances on two
or more comparative dates.
3) To analyze increase or decrease in rupee amounts as well as in percentage by taking the
data of previous years as base.

4) To review the past financing and investing activities and their effect on the financial
position of the firm.
Importance:
1) It helps in determining the future trends of assets, liabilities and capital which helps in the
planning process.
2) Comparative balance sheet shows not only the balances of accounts as on different dates
but also the extent of their increase or decrease in various items of balance sheet between
these dates.

Chapter 4: DATA ANALYSIS & FINDINGS

BALANCE SHEET OF HUL:

PROFIT & LOSS ACCOUNT OF HUL:

BALANCE SHEET OF GCPL:

PROFIT & LOSS ACCOUNT OF GCPL:

Liquidity ratio:
1) CURRENT RATIO:
Current ratio may be defined as the relationship between current assets and current
liabilities. This ratio also known as Working capital ratio is a measure of general liquidity and is most
widely used to make the analysis of a short-term financial position (or) liquidity of a firm.
Current Assets

Current Liabilities

Cash in hand

Outstanding or accrued expenses

Cash at bank

Bank over draft

Bills receivable

Bills payable

Inventories

Short term advances

Work in progress

Dividend payable

Marketable securities

Income tax payable

Short term investments

Sundry creditors

Ratio:

Graphical representation:

Interpretation:
The ideal level of current ratio is 2:1. Higher the current ratio, the larger is the amount of rupees available
per rupees of current liabilities, the more is the firms ability to meet current obligation and greater is
safety of fund of short term creditors.
HULs current ratio is not better than its ideal level. But if we see the current ratio of the company for last
three years it has increased from year 2012-2013 to 2014-2015. The current ratio of company is near the
ideal ratio. This depicts that companys liquidity position is much better in previous years. Its current
assets are more than its current liabilities in 2013-2014 & 2014-2015.
GCPLs current ratio is not better than its ideal level. But if we see the current ratio of the company for
last three years it has decreased from year 2012-2013 to 2013-2014 and then again increases from 20132014 to 2014-2015. The current ratio of company is near the ideal ratio. This depicts that companys
liquidity position is much better in previous years. Its current assets are more than its current liabilities in
2012-2013.

2) Quick ratio:
Quick ratio is a test of liquidity than the current ratio. The term liquidity refers to the
ability of a firm to pay its short-term obligations as & when they become due. Quick ratio may be defined
as the relationship between quick or liquid assets and current liabilities. An asset is said to be liquid if it is
converted into cash within a short period without loss of value.
Quick Assets

Current liabilities

Cash in hand

Outstanding or accrued expenses

Cash at bank

Bank over draft

Bills receivable

Bills payable

Sundry debtors

Sundry creditors

Marketable securities

Dividend payable

Ratio:

Graphical representation:

Interpretation:
Quick assets are those assets which can be converted into cash within a short period of time, say to six
months. So, here the sundry debtors which are with the long period does not include in the quick assets.
A quick ratio is an Indication that the firm is liquid and the ability to meet its current liabilities in time.
The Ideal quick ration is 1:1, Company Quick ratio is less than the ideal ratio. So, The Quick ratio of
HUL is increasing year by year and the quick ratio of GCPL IS decreased in 2013-2014 and then
increases in 2014-2015.

3) Cash ratio:
Cash ratio = (cash & bank balances + current investments) / current liabilities

Ratio:

Graphical representation:

Interpretation:
Cash ratio of HUL increasing year by year and cash ratio of GCPL is decreased in year 2013-2014 and
again increased in 2014-2015.

4) INVENTORY TURNOVER RATIO:


Ratio:

Graphical representation:

Interpretation:
Inventories are a major part of current assets. If any company wants to manage its working capital
efficiency, it has to manage its inventories efficiently.
HULs stock turnover ratio is increasing year by year while the stock turnover ratio of GCPL is decreasing
year by year.

5) Fixed assets turnover ratio:


It is also known as sales to fixed assets ratio. This ratio measures the
efficiency and profit earning capacity of the firm. Higher the ratio, greater is the intensive utilization of
fixed assets. Lower ratio means under-utilization of fixed assets.

Ratio:

Graphical representation:

Interpretation:
FATO of both the companies (HUL & GCPL) is decreasing year by year. This means there is
underutilization of fixed assets in both the companies.

6) Total assets turnover ratio:


Ratio:

Graphical representation:

Interpretation:
TATO of HUL is decreased in year 2013-2014and then again increases in year 2014-2015. While the
TATO of GCPL is decreasing year by year.

7) Debt-assets ratio:
Ratio:

Graphical representation:

8) Debt-equity ratio:
Ratio:

Graphical representation:

9) Net profit margin:


Net profit ratio establishes a relationship between net profit (after tax) and sales
and indicates the efficiency of the management in manufacturing, selling administrative and other
activities of the firm. It also indicates the firms capacity to face adverse economic conditions such as
price competitors, low demand etc. Obviously higher the ratio, the better is the profitability.

Ratio:

Graphical representation:

Interpretation:
The net profit ratio is the overall measure of the firms ability to turn each rupee of income from services
in net profit. If the net margin is inadequate the firm will fail to achieve return on shareholders funds.
High net profit ratio will help the firm service in the fall of income from services, rise in cost of
production or declining demand.
HULs net profit margin is decreasing year by year while GCPLs net profit margin is decreased in year
2013-2014 and then again increased in year 2014-2015.

10) Return on equity:


Return on shareholders investment, popularly known as Return on investments
(or) return on shareholders or proprietors funds is the relationship between net profit (after interest and
tax) and the proprietors funds.

Ratio:

Graphical representation:

Interpretation:
The return on equity of both the company (HUL & GCPL) is decreasing year by year.

11) Return on total assets:


Profitability can be measured in terms of relationship between net profit and
assets. This ratio is also known as profit-to-assets ratio. It measures the profitability of investments. The
overall profitability can be known.

Ratio:

Graphical representation:

INTERPRETATION:
HULs ROTA is decreased in year 2013-2014 and then again increased in year 2014-2015. While, GCPLs
ROTA is decreasing year by year.

Chapter 5: RECCOMENDATION & SUGGESTIONS

Observations & findings:

As we know that ideal current ratio for any firm is 2:1. If we see the current ratio of the
HUL for last three years it has increased from 2012-2013 to 2014-2015. This depicts that
companys liquidity position is sound. Its current assets are more than its current
liabilities. While the current ratio of GCPL for last three 2012-2013 to 2014-2015 is
decreased then again increased which shows that the current liabilities is more than the
current assets.

A quick ratio is an indication that the firm is liquid and has the ability to meet its current
liabilities in time. The ideal quick ratio is 1:1. Both Companys quick ratio is less than the ideal
ratio. This shows both the company has liquidity problem.

Inventory conversion period shows that how many days inventories take to convert from raw
material to finished goods. In the company inventory conversion period is decreasing. This shows
the efficiency of management to convert the inventory into cash.

HULs net profit margin is decreasing year by year while GCPLs net profit margin is decreased
in year 2013-2014 and then again increased in year 2014-2015.

HULs ROTA is decreased in year 2013-2014 and then again increased in year 2014-2015. While,
GCPLs ROTA is decreasing year by year.

The return on equity of both the company (HUL & GCPL) is decreasing year by year.

TATO of HUL is decreased in year 2013-2014and then again increases in year 2014-2015. While
the TATO of GCPL is decreasing year by year.

FATO of both the companies (HUL & GCPL) is decreasing year by year. This means there is
underutilization of fixed assets in both the companies.

Suggestions:
After interpretation and analysis, I am giving certain suggestions to the company which I hope may be
helpful for the company.

The company should utilize its stock more efficiently.

The company should pay attention towards the proper and efficient utilization of working capital.

BIBLIOGRAPHY
www.godrejcp.com
www.hul.co.in
Financial Management, I M Pandey (book)
https://www.linkedin.com/pulse/20140806181716-59817714-financialanalysis-a-short-note-on-tools-and-techniques-of-financial-analysis?
forceNoSplash%3Dtrue&ei=OtVJSxA1&lc=enIN&s=1&m=639&host=www.google.co.in&ts=1456414460&sig=ALL1Aj6
_3cadkO9dlVWTWh6lDxv8vit_Ag (financial analysis: a short note on tools
and techniques of financial analysis)
https://accountlearning.blogspot.com/2010/02/importance-and-addvantagesof-ratio.html?m%3D1&ei=no48TyLH&lc=enIN&s=1&m=639&host=www.google.co.in&ts=1456321887&sig=ALL1Aj4
kE_AatW6ZZJXQormalGi-kzcQwA (importance and advantages of ratio
analysis)
Kennedy and Muller (1999), research article on financial performance
I.M.Pandey (2007), research article on financial performance
Susan Ward (2008), research article on financial performance
Rachchh Minaxi A (2011), research article on financial performance
Priyaaks (Mar 2012), research article on financial performance
Gupta and Heffner (1972), the differences in financial ratio averages
between industries.