Prepared By:-

Kashish Goyal-191028
Mayank Jain-191033
Padia Archin Ramakant-191039
Prateek Jain-191044
Rahul Singh-191047
Rohit Goyal-191049
 MANAGEMENT ACCOUNTING

Case On Hindustan UniLever Ltd.

RATIO ANALYIS

LIQUIDITY RATIO:-
 It measures the liquidity position of the company.

 It is useful for creditors and debtors.

 It measures the firms ability to pay back the dues
It is mainly of the following types:-

1. Current Ratio = Current Assets/ Current Liabilities

2. Quick Ratio= Quick Assets/ Current Liabilities
Quick Assets= Current Assets- Prepaid Expenses- Inventory
3. Debtors Turnover Ratio= Net Credit Sales/ Avg.Debtors
4. Creditors Turnover Ratio= Net Credit Puchases/Avg.Creditors

Calculation Of Current Ratio:-

Significance Of Current Ratio:-
A Current ratio measures the ability of a company to discharge its day-to-day bills, or
current liabilities as and when they fall due, out of the cash or near cash, or current assets
that it possesses.

A Current Ratio is an important indicator of a companies current and prospective liquidity

position.

Analysis:-

1. Very low Current Ratio as compared to that of Industry.

2. Higher dependency on short term borrowings.
3. Higher Provisions.
4. India Being underdeveloped country hence low availability of long term debts.
5. Low Debtors- being FMCG company

Quick Ratio:-

Calculation:-

Significance:-

 It measures as to how quick is the ability of a company to discharge its

current liabilities net of working limits, as and when they fall due, out of
cash or current assets net of inventories that it possesses.
Analysis:-

1. Very low ratio signifies, low liquidity of the firm

2. HUL being a FMCG company, hence low debtors.
3. High Inventory of the company- which is not a good sign for the
company.

TREND ANALYSIS
The term "trend analysis" refers to the concept of collecting information and attempting to spot a
pattern, or trend, in the information.
 Trend Analysis:-
 Sales has been increasing but profit has been declining

Reasons:

 Increase in expenses:

• Increase in Manufacturing Expenses

• Increase in Operating Expense

• Net Profit Margin is declining – Low profitability

• Assests are almost consistent over the years

Earnings Per Share (2006)

 Share Capital = 2206.72

 Assumption : we have assumed that the face value of each share = Rs. 10 per share

 Number of shares = 220

 EPS = (PAT – Preference Dividend) / (No. of shares)

= 15396/220

= Rs. 70 / per share

Analysis:-

 EPS of HUL as compared to Industry is very high.

 Reason may be as follows:

 Low reliance on shares , hence high control in their hands

 High dependency on short term loans

 Mr. Arvind Shah can invest in the company.

DEBT- EQUITY RATIO ( Solvency Ratio)

A measure of a company's financial leverage calculated by dividing its total
liabilities by stockholders' equity. It indicates what proportion of equity and debt the
company is using to finance its assets.

D- E Ratio = Debt/Equity

A high debt/equity ratio generally means that a company has been aggressive in
financing its growth with debt.

Calculation:-

Analysis:-

1. Low Debt Equity ratio signifies lower dependence on Long term Debts.
2. HUL being low capital intensive firm, hence lower ratio is acceptable.
3. India being under developed country hence long term loans availability is less.
Net Profit Margin:-
Net Profit Margin= Net Profit/ Sales * 100
The profit margin tells you how much profit a company makes for every $1 it generates
in revenue or sales. Profit margins vary by industry, but all else being equal, the higher a
company's profit margin compared to its competitors, the better it is.

RETURN ON ASSETS ( ROA) ( DU PONT Analysis)

An indicator of how profitable a company is relative to its total assets. ROA gives an
idea as to how efficient management is at using its assets to generate
earnings. Calculated by dividing a company's annual earnings by its total assets,
ROA is displayed as a percentage. Sometimes this is referred to as "return on
investment".

The formula for return on assets is:-

= Net Profit Margin * Assets Turnover

= Net Profit/ Net Sales * Net Sales/ Total Assets

* 100
RETURN ON EQUITY (ROE- DU Pont Analysis)
The amount of net income returned as a percentage of
shareholders equity. Return on equity measures a corporation's
profitability by revealing how much profit a company
generates with the money shareholders have invested.

 Company is providing higher return on equity

 Reasons may be lower share capital

EQUITY MULTIPLIER

 A measure of financial leverage.

 Calculated as:

Total Assets / Total Stockholders' Equity

Like all debt management ratios, the equity multiplier is a way of examining
how a company uses debt to finance its assets. Also known as the financial
leverage ratio or leverage ratio.