EFFECT OF CASH MANAGEMENT ON FINANCIAL

PERFORMANCE OF THE FMCG COMPANIES LISTED ON THE

STOCK MARKET
 TABLE OF CONTENTS

1. Introduction.............................................................................................................1
1.1. Theoretical framework....................................................................................2
1.2. Statement of the problem...............................................................................14
1.3. Importance of the study....................................................................................15
1.4. Objectives of the study..................................................................................16
1.5. Significance of the study...............................................................................17
1.6. Scope of the study.........................................................................................17
1.7. Need for the study.........................................................................................17
2. Review of literature..............................................................................................19
2.1. Research gap..................................................................................................26
2.2. Conceptual framework..................................................................................26
3. Research methodology..........................................................................................28
3.1. Research design.............................................................................................28
3.2. Sampling frame.............................................................................................28
3.3. Sampling technique.......................................................................................29
3.4. Sample size....................................................................................................29
3.5. Period of study...............................................................................................29
3.6. Source of information....................................................................................29
3.7. Data collection method..................................................................................29
3.8. Statistical tools...............................................................................................30
3.9. Variables........................................................................................................30
3.10. Limitations of the study.............................................................................32
4. Analysis of data and interpretation.......................................................................33
5. Summary of findings, suggestions, and conclusions............................................63
5.1. Findings.........................................................................................................63
5.2. Suggestions....................................................................................................67
5.3. Conclusions...................................................................................................67
References....................................................................................................................69
 LIST OF TABLES

Table 1: Current ratio of selected FMCG companies..................................................33

Table 2: Quick ratio of selected FMCG companies.....................................................35
Table 3: Gross profit margin of selected FMCG companies.......................................37
Table 4: Net profit margin of selected FMCG companies...........................................39
Table 5: Operating profit margin of selected FMCG companies.................................41
Table 6: Return on asset of selected FMCG companies..............................................43
Table 7: Return on equity of selected FMCG companies............................................45
Table 8: Leverage of selected FMCG companies........................................................47
Table 9: Firm Size of selected FMCG companies.......................................................49
Table 10: Cash to total asset of selected FMCG companies........................................50
Table 11: Operating cash flow of selected FMCG companies....................................52
Table 12: Investing cash flow of selected FMCG companies......................................54
Table 13: Financing cash flow of selected FMCG companies....................................56
Table 14: Descriptive statistics....................................................................................58
Table 15: Correlation between the cash management practices and financial
performance of FMCG companies...............................................................................60
Table 15: Correlation between the cash management and financial performance of
FMCG companies........................................................................................................61
Table 16: Impact of cash management on financial performance...............................62
 LIST OF FIGURES

Figure 1: Current ratio of selected FMCG companies.................................................34

Figure 2: Quick ratio of selected FMCG companies...................................................36
Figure 3: Gross profit margin of selected FMCG companies......................................38
Figure 4: Net profit margin of selected FMCG companies..........................................40
Figure 5: Operating profit margin of selected FMCG companies...............................42
Figure 6: Return on assets of selected FMCG companies...........................................44
Figure 7: Return on equity of selected FMCG companies...........................................46
Figure 8: Leverage of selected FMCG companies.......................................................48
Figure 9: Firm Size of selected FMCG companies......................................................49
Figure 10: Cash to the total asset of selected FMCG companies.................................51
Figure 11: Operating cash flow of selected FMCG companies...................................53
Figure 12: Investing cash flow of selected FMCG companies....................................55
Figure 13: Financing cash flow of selected FMCG companies...................................57
Figure 14: Descriptive statistics...................................................................................59
 CHAPTER-I

INTRODUCTION

1. INTRODUCTION

Cash is the most valuable product for a company’s operations. Cash is the key input
required to keep a business running and the final output from selling a company’s
service or good. The business should carry no more or less than cash. Excess cash
stays idle and contributes little to the company’s profitability; therefore, cash
shortages would disrupt operations. As a result, the finance manager can keep the
company’s cash position stable. The finance cash director is money that a company
distributes automatically and without restriction. The phrase “cash” refers to the
company’s coins, currencies, checks, and bank account balances. Near-cash goods,
such as marketable securities or bank time deposits, are commonly accompanied by
cash. The fundamental benefit of tax-exempt assets is converting to cash quickly.
When a company has extra cash, it usually invests it in marketable securities. The
customer benefits from this investment structure.

Due to the shortage of financial resources available to many organizations and varied
objectives. It acts as the focal point for the organization’s operational procedures,
ensuring its goals are met. Cash management entails cash planning, cash flow control,
setting the optimal funds level, and investing surplus cash. Businesses must strike a
balance between liquidity and profitability while conducting day-to-day operations.
Liquidity is required to meet their short-term obligations on time while remaining
profitable. According to Weston and Copeland (2008), businesses require a cash
reserve to balance their non-perfectly matched short-term cash inflows and outflows.
Cash management is intimately tied to liquidity and profitability (Raheman & Nasr,
2007). Effective cash management not only increases a company’s chances of
survival but also helps it attract investors willing to support its expansion, as that is
the first thing investors look for when analyzing a company and its cash flow, which
reflects its cash management methods (Merchant factors, 2013) To achieve normal
company objectives, cash flow management, and allocation must be efficient. The
difference between cash expenses and cash collection improves the company’s
liquidity and profitability over time, resulting in overall growth (Brinchk et al., 2011).
Cash management ensures that corporations keep a sufficient cash balance and that
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any excess cash is good to use. It is the responsibility of business entities to avoid
excessive reliance on overdrafts as a source of financing. Businesses that over-apply
for overdraft facilities may earn a high rate of return. Still, they will struggle to
maintain adequate cash flows due to seasonal business and delays caused by the
length of credit granted. Cash is a critical short-term asset for the operations of a
business. It is the primary input required to keep the company running (Abu Tabanja,
2005). According to business and financial analysts, the primary reasons for the
failure of most enterprises and firms are ineffective cash management and poor
performance. Businesses and corporations fail for various reasons, including poor
cash management and financial failure. Cash and other current assets, combined with
effective management, almost always determine a company’s survival or demise.

1.1. THEORETICAL FRAMEWORK

Definition

Money management relates to collecting, storing, controlling, and distributing

corporate cash and cash equivalents to ensure clients’ effective usage of liquid
resources. Money is the company’s lifeline, and therefore, a good cash flow position
within the company is necessary.

Receivables Cash Management

Any sum received by the company but not yet paid, i.e., the remaining amount to be
paid in the future shall be known as the debts. A company must monitor its
receivables to maintain excess cash inflow. It helps the company to meet its cash
needs quickly. It is essential to arrange the cash debts to understand debts better and
persuade them for a short lending period.

Payables Cash Management

The payables refer to the customer’s unpaid fee and will soon be payable. The
company is preparing its cash outflow to buy the investors for an extended lending
period. It helps the organization retain cash for extended periods to fulfill short-term
demands and unforeseen expenditures. The company would also use this cash to
generate additional sales for that particular credit period.

MOTIVES FOR HOLDING CASH

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Keynes, a famous economist, highlighted the three key reasons for keeping cash.

 The transaction motives;

 The precautionary motive; and

 The speculative motive

FACTS

Cash management deals with the regulation of cash flows to and from the company,

• Cash flow within the company, and

• The cash balance is retained by deficit financing or surplus money
investments.

It can be reflected in the cash management process. Sales yield cash to be paid out.
Investment of the surplus cash during this deficit period is at a low cost. At the same
time, this always needs balance and stability. Money management is more critical
than other current assets because capital is the largest and least efficient asset. It is
important, given that it is used to fulfill its obligations. Even cash is unproductive.
Compared to fixed assets or inventories, it produces no products for sale.
Consequently, the object of cash management is to maintain sufficient cash control to
keep the company’s financial position sufficient and make a profit from the financial
surplus.

Managing money is also critical, as there is no perfect match between cash inflows
and cash outflows. It isn’t easy to forecast cash flows, particularly inflows, correctly.
Capital outflows will outweigh cash flows for several periods because taxes,
dividends, or seasonal inventory payments are through. Money inflow is also more
than money as there can be huge cash transactions, and large quantities of debtors
should be rendered promptly. Therefore, cash management is critical since cash is the
smallest proportion of the current assets, while management manages the property
more.

In recent years, various advances have been made in cash management techniques. An
apparent aim is to control the company’s finances to stay small and invest surplus
capital in profitable investments. The company must develop efficient management
strategies to address the uncertainty around cash flow forecasts and a lack of

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communication between cash sales and payments. The organization will develop
strategies for cash management. The company will set out plans for the four types of
cash management.

• Financial planning Cash inflows and outflows for each cash surplus or deficit
shall be included in the preparation process. For this reason, the cash budget
should be drawn up.
• Cash flow management: The Company wishes to assess the proper cash flow
controls. It is essential to accelerate cash inflow while decelerating cash
outflows as much as possible.
• The company shall determine the correct volume of the cash balance for the
maximum liquidity flow. The costs for the surplus cash and the probability of
cash deficit should be combined to calculate the best cash balance point.
• Over capital Investment surplus cash reserves should be wisely spent on
making profits. The businesses must decide how these cash flows are split into
alternative short-term investment instruments, such as bank deposits,
marketable securities, or interoperate loans.

Types of Cash Management

Following are the types given below:

 Operating cash flow: cash flow is used in the cash flow statement of a
company and does not include the cash flow of investment.

 Free cash flow to equity: Free cash flow to equity is the amount of cash left
after money is reinvested.

 Free cash flow for business used for valuation and financial analysis purposes.

 Net cash change transforms the net cash balance from one accounting period
into another.

Basic Principles of Cash Management

 Conservation of lower stock: maintaining a larger inventory can often

contribute to unequal cash trapping. Even the storage room is overfilled.
Organizations must establish appropriate methods and strategies for
maintaining lower rates of inventories.

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  Speeding up the cash payment process: companies should make it easier for
consumers and customers to pay their duties and have competitive deals and
other opportunities to pay as quickly as possible.

Objectives of Cash Management

 Meet Working Capital Requirement: The Company must retain significant

cash only by successful cash management to cover its daily expenses.
 Capital investment planning helps schedule capital spending and build
debt/equity ratios to secure financing.
 Unorganized costs: the company also faces unforeseen circumstances, such as
machinery failure. There are unforeseen expenses; cash surpluses are a
lifesaver in such situations.
 Involves investment: The other goal of cash management is to spend the right
way and the right sum of the surplus funds.
 Better utilization of the funds: makes the best use of the available funds by
maintaining a reasonable cash balance with the investment.
 Avoid insolvency: The insolvency situation can arise if the company does not
manage cash effectively. Either due to a lack of cash or because capital
doesn’t profit.

Cash Management Models

Cash management includes a hands-on approach and a solid base to decide whether
the company needs cash to cover the everyday costs. Some models were developed to
decide how much money was spent on the different parameters. Below are the two
main versions dealt with in more detail

The Baumol’s EOQ Model

In 1952, William J. Baumol gave Baumol the EOQ model based on the
Quantity of Economic Order (EOQ), which influences the company’s cash
management. To reach client spending on the one hand and investment opportunities
profitability, it emphasizes maintaining the best cash balance in one year. The
following Baumol EOQ System formula defines the cash sum the organization will be
funding:

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The Miller – Orr Model

According to Merton H. Miller and Daniel Orr, the Baumol model only determines
cash withdrawal, but cash is the most volatile industry. The company also has cash
surpluses and discourages retirement; instead, it may require investment. Regardless
of the withdrawal amount, the company would then have to decide the point of return
or quantity of money to hold. The model focuses only on cash withdrawal if the fund
is below the return when the surplus-value exceeds the sum. Below is a graphic
depiction of this pattern:

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We can see that the chart above indicates a lower cap, the total cash that a firm needs
to work. Adding the cash spread (Z) to this lower limit returns us to the average cash
requirement. Nevertheless, the company does not spend until full investment returns
are met. The lower limit is applied to the triple spread (Z) by adding the upper limit.
Usually, the cash balance is shown between the lower and upper limits. Let’s examine
the model Miller-Orr to figure out the cash return and distribution between the lowest
and maximum quantities.

Cash Control Techniques

Effective cash management strategies are:-

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 • Cash budgeting
• Ratio analysis
• Fund flow statement
• Financial reporting
• Linear programming
• Goal preparation and
• Portfolio administration.

Some of these are discussed below.

1. Cash Budgeting: The cash received and allocated calendar represents expected
outflows and cash inflows. It is a tool for cash management and is an
instrument for controlling cash. The Cash budget report aims to determine the
gap between actual expenditure and budget and make it possible to compare
actual cash balances at the end of the plan era. There are significant
differences in the actual and expected balance. The cash budget must be
revised and integrated into the report for the following year.
2. Ratio Analysis:- This offers, independently of the use of accounting ratios, an
indice of a company’s financial results. It tracks and controls the financial
performance of an organization and its business operations and different facts.
Ratios review and perception track
3. Flow Statement for the fund:- Analysing the annual statements for the
organization’s financial position provides a useful means of preparing and
monitoring financial capital. Both statements explain economic spending and
are called a cash flow statement and a fund balance statement. Every quarter,
the statements are provided to demonstrate improved cash position for a
company and networking capital accounts expenditure, to provide
management with calculation methods for recognizing the source and use of
the net cash capital account. The report is released every quarter.
4. Financial reports:- Money reports cause the current patterns and forecasts to
contrast constantly.
• The daily cash return,
• Quarterly cash return, and
• Monthly cash reports are the main cash reports.

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 The most recent cash records can be found. As the name suggests, the cash
report shows the cash scene every day. The daily cash report and the daily
treasury report provide a thorough overview of changes in cash, marketable
securities, debtors, and creditors. The monthly cash review includes an annual
cash change description.

Functions of Cash Management

All kinds require cash management of organizations, irrespective of size, type,

and location. The following are the varied aspects of cash management

 Idle Cash Investing: To use surplus capital, the company needs to seek
alternative short-term investments.

 Cash Flow Controls: Rising cash outflow and increasing cash flow are integral
parts of the enterprise.

 Money planning: Financial management needs planning and action to hold

enough cash in hand and invest soundly.

 Cash flow management: It is necessary to maintain the correct cash flow in the
business by reducing expenditures and producing profits from investment to
generate a positive cash flow.

 Money level optimization: The Corporation must continuously manage the

volume of liquidity and funds available for business transactions.

Cash Management Strategies

Cash administration needs decision-making at every stage. It is a systematic

approach and not an immediate response to financial problems. Below are the
Strategies for Cash Management

 Financial credit: The Company should have a bank line at the start to cover
immediate cash and unforeseen expenses.
 A business line of credit: The excess capital will be invested in cash market
funds when running a business. They are easy to convert to cash whenever
needed and generate significant income over time.

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  Lockbox Account: Banks are allowed to send their payments to their mailbox.
Lockbox account: The banks run a lockbox to avoid cash withdrawals every
day.
 Sweep account: The sweeping account scheme, a combination of savings and
fixed deposit accounts, may also be used by companies that maintain the
minimum savings account balance and transfer the excess amount to the fixed
deposit account.
 Cash Deposit (CDs): a company will invest in cash deposits if it has a stable
financial position and can forecast costs well, even with expanded usage.
These CDs are helpful but can be prosecuted for early withdrawals.

Cash Flow Management Techniques

Managing cash flow is a contemplative approach that needs many studies. The
following are the different management techniques or approaches for managing the
cash flow:

 Accelerating Accounts Collection Income: One of the best ways to improve

cash inflow and increase cash liquidity is fast payroll collection and debt
recovery.

 Formation of Payable Accounts. In addition, a company can try to prolong the

payment of dues by obtaining an extended loan term from the creditors.

 Cost reduction: The company must find ways to reduce its operating costs to
produce positive cash flow and maximize income for the corporation.

 Daily cash flow management: managing cash inflow and outflow, prioritizing
spending and debt, and clarifying the financial situation.

 Wise use of banking services: The service should be used effectively and
intelligently, such as the credit line, cash deposits, lockbox account, and sweep
account.

 Technology upgrade: Digitalisation allows companies to provide a financial

database and slideshow anywhere.

Limitations of Cash Management

10
  Money management is a time-consuming and skilled activity that needs to be
regularly carried out.
 The company can hire consultants or other experts to pay administrative and
consulting fees because financial expertise is needed.
 Small businesses which only face challenges such as skills, experience, time,
and capacity to manage risks

Overview of FMCG

The FMCG sector in India is the fourth-largest, providing excellent business

opportunities for overseas companies. Between April 2000 and March 2020, the
FMCG sector attracted a healthy and potential 16.28 billion USD in FDI. This follows
significant growth in private consumption and rural income over the last decade.

The food and beverage sector is an essential part of the country’s FMCG industry,
which contributes to around 3% of GDP. According to the report, this industry is the
country’s largest employer, employing almost 7.3 million people.

The Indian FMCG and food & beverage businesses are undeniably thriving and
profitable investment locations for overseas investors with impressive growth
indicators and historical records.

However, competition is increasing, and important contemporary trends present

opportunities, needing strategic planning to secure long-term success. Overseas
investors must collaborate with an FMCG consultant in India or a consumer goods
and retail consultant to create a market entry strategy specific to the Indian market and
secure profitable outcomes.

Market size and importance of the FMCG

The Indian FMCG business has grown dramatically on many fronts. According to
another study, a significant shift in the dynamics of the country’s tier 1 and tier 2
cities will result in a large shift in the market size of the Indian FMCG sector by 2025.

The following are significant indicators and growth trends in India’s FMCG industry
that suggest a fundamental shift.

11
Affluent and elite households in Tier 1 towns with more than 10 LPA will account for
48% of spending by 2025. Furthermore, there is a growing desire for premiumization
and a greater demand for branded products.

Furthermore, according to the survey, all Tier 2 towns in India will grow at a 4.5-fold
rate and account for around 45 percent of FMCG consumption by 2025. It will be the
primary growth driver for luxury items, creating another profitable opportunity for
developing international businesses.

Furthermore, rural consumption is rapidly expanding. The rural FMCG market in

India is anticipated to reach 220 billion USD by 2025.

To reap the benefits of these inexplicable changes in the Indian FMCG market
structure, foreign investors must grasp and understand developing consumer behavior.

A professional FMCG consultant in India can help in this regard. Experts can build a
particular market entrance plan after determining your objectives and assessing
market competitors with an in-depth grasp of India’s Indian market structure,
consumer products, and retail rollout.

Governmental Initiatives

The Indian government is also aggressively pursuing attractive policies to aid in the
expansion of the FMCG sector, such as:

• The Indian government has approved 100 percent FDI in cash and carry and
single-brand retail categories.
• The Indian union cabinet’s planned PLI Scheme in 2020 has also enhanced
industry capabilities and exports.
• Furthermore, the installation of GST has resulted in significant reductions in
tax bands for a wide range of FMCG products. The GST on food has been
reduced to 0-5 percent.

Recent Developments in the Indian FMCG Industry

The COVID-19 outbreak and subsequent statewide shutdown wreaked havoc on

India’s food and beverage industry. As detailed below, the industry has devised
innovative strategies to halt the business’s downward spiral and reestablish
profitability.

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Consumer goods and retail specialists can contribute considerably more to the cause.

Increased emphasis on digitization

During the COVID-19 crisis, digitization was a major trend in the Indian FMCG
industry. Most FMCG companies have joined with major e-commerce platforms like
Flipkart, Big-basket, and Groffers to distribute items to clients while complying with
strict safety regulations. According to an industry expert, e-sales commerce’s
proportion in the Indian FMCG sector will increase from 2-3% pre-COVID to 4.5%
post-COVID.

International businesses wishing to expand in India must invest in technological tools

and software that allow online shopping, product launches, and safe online
transactions to leverage this rise in digitalization and e-commerce trends.

In this context, collaboration with an FMCG expert in India has become critical.

Reputable consumer goods and retail consultants in India can help you find qualified
employees and management teams for your company.

Cloud-based Kitchens

Because of the sharp drop in customer traffic, most food and beverage companies
rapidly migrate to cloud kitchen models.

This technique is primarily supported by alliances with food aggregators that offer
online ordering and delivery. This trend is predicted to accelerate by 15% in India
during the next few months.

Health and well-being

Consumers are increasingly more concerned with their hygiene and well-being.
Organic items, nutritional foods, and self-care hygiene products are highly demanded.
They led FMCG companies to embrace these new trends and build novel healthcare
products.

To capture this rapidly altering customer behavior, foreign corporations must recruit
the assistance of India’s best food and beverage consulting organizations.

Competent consumer goods and retail consultants can spot new market opportunities
and devise long-term growth strategies.

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Packaged Goods Growth

Again, the COVID era’s health and cleanliness trend is driving demand for packaged
food goods in the food and beverage business. Packaged ginger and garlic pastes, as
well as ready-to-cook and ready-to-eat dishes, are popular among consumers.
Furthermore, there is a growing demand for immune-boosting foods and beverages
like herbal tea and aloe vera juice.

Importance of consumer goods and retail consultants in India

Recent developments, favorable government policies, and robust growth in the FMCG
industry contribute to a more favorable climate for foreign investment. The fierce
competition and complicated dynamics of urban and rural consumer demand, on the
other hand, provide a considerable obstacle for international enterprises attempting to
establish a foothold in India.

Tecnova, a well-known FMCG consultant in India, will provide comprehensive food

and beverage consulting services in India, which will include the following:

• Customized market research to identify potential prospects

• Valuable customer insights obtained from rigorous quantitative and qualitative
research
• Thorough operational and financial analysis backed by a strong execution
strategy for retail expansion in India
• Complete marketing and promotional operations assistance
• Assistance in sourcing and creating manufacturing partnerships support
• Complete support for joint ventures and acquiring brand and distribution
networks

The Indian FMCG market is expanding rapidly, creating exciting chances for foreign
enterprises to establish a successful presence. In the face of fierce competition,
however, only a thorough market study and constant assessment of altering consumer
behavior will aid in establishing a strong foothold in the relevant industrial field.

As a result, businesses must enlist the help of a renowned FMCG expert in India. It
will help rebuild India’s market entrance strategy through strong food and beverage
consulting, assuring long-term profitability and sustainable growth.

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1.2. STATEMENT OF THE PROBLEM

Fast-moving consumer goods (FMCG) are vital to developing-country economies.

Their main concern was controlling cash in their operations to preserve a profit
margin. Many businesses were unaware of the sources from which they borrowed
money. This put the enterprises in a cash-management bind and harmed their financial
performance. Due to low-profit margins, some FMCG companies have been in
precarious positions where they cannot meet their business responsibilities. Using
financial data from company accounts on the Indian stock exchanges, the researcher
evaluated the relationship between nine FMCG companies’ cash management and
financial success. And using the product correlation regression model, it was
discovered that there was a high negative correlation between the independent
variables (financial performance) and the dependent variables (Cash management).
According to the report, proper cash management, a shorter cash conversion cycle,
and a good credit policy can improve profitability. Variations in income statements
and the current financial position of different organizations have happened
worldwide. This is because they are unaware of and unable to implement cash
management tactics in their day-to-day operations. As a result, several enterprises
have become illiquid and insolvent, while others have collapsed (Media, 2012).

Many firms, notably those in the fast-moving consumer goods (FMCG) sector,
struggle financially in India. Due to a cash shortage, they cannot satisfy day-to-day
company commitments such as tax payments, salary and wage payments, and
dividend payments to shareholders. Ineffective cash management was mainly to
blame for the problems. In India, several owners have invested in FMCG enterprises
to profit from commercial opportunities in the area, which is widely occupied due to
the area’s quiet. Shareholders want the company they have invested in to meet their
expectations and profit. While some organizations have performed wonderfully, the
majority are trapped in a cycle of bad financial performance. This attempted us to
conduct this study. Given that cash management includes several components such as
the cash conversion cycle, inventory management, receivables management, and
payables management that serve as indices for measuring an enterprise’s financial
performance, this study will look at the relationship between each index and ROA as
a measure of financial performance. The sample group of FMCG firms will be used
for the study.

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1.3. IMPORTANCE OF THE STUDY

Each company requires cash in varying amounts. Cash is essential since it is the
lifeblood of the business. Cash is a crucial input required to keep operations running
regularly. Additionally, the corporation’s estimated total output from the service or
product Manu sale. “Each firm must have a cash balance sufficient to fulfill
immediate cash requirements.” Because cash does not generate money for the firm,
some businesses invest in cash equivalents such as Government Bonds, which provide
most of the convenience of cash while generating revenue for the holder, albeit at a
slower rate than the business receives.” A financial manager manages the cash flows
created by the firm’s operations, which includes forecasting cash inflows from sales
and outflows from expenses, among other things. It assists financial managers in
forecasting the frequency and amount of future cash flows. The role of cash
management does not end there; financial managers may also be required to seek
sources of short-term cash or ways to invest excess cash in the short term. The finance
manager manages cash management and transactions in most businesses, including
marketable securities. When cash is plentiful, marketable securities are purchased;
when cash is tight, marketable securities are sold to supply appropriate cash. Each of
these problems is critical to financial management for various reasons. Prudent
management of cash, near-cash assets, and marketable securities enables the firm to
keep only the amount of cash required to pay its commitments as they emerge; as a
result, the firm can meet its obligations and is also able to capitalize on the carrying
opportunity.

1.4. OBJECTIVES OF THE STUDY

The primary objective of this study is to evaluate how cash management influences
the financial performance of FMCG.
Secondary objectives
 To identify the liquidity position of selected FMCG firms.
 To determine the profitability of selected FMCG firms
 To evaluate the relationship between the cash management and financial
performance of FMCG firms.

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  To interpret the reason for the growth of the company with the help of cash
flow statement analysis
 To make suitable suggestions for enhancing the company

1.5. SIGNIFICANCE OF THE STUDY

Every firm relies heavily on cash management. It is a broad topic that includes cash
collection, concentration, disbursement, liquidity monitoring, cash management, and
short-term investments. Effective cash management improves an organization’s
overall financial performance and pushes its success. A company cannot fulfill its
goals unless its cash is appropriately handled and allocated. Proper cash management
enables a corporation to manage the cash cycle effectively by regulating and
projecting cash flows over many periods. Furthermore, studying and comprehending
cash administration permits management to organize the unforeseeable circumstances
that almost every firm and corporation face.

FMCG plays a vital role in providing many urban and rural areas. The research on this
organization will aid the same enterprise by revealing and improving its existing
management and financial performance. This research will assist the government in
formulating new public-sector initiatives and policies.

1.6. SCOPE OF THE STUDY

Fast-moving consumer goods (FMCG) were chosen as a representative sample among

the several sectors. As a result, the finding cannot be widely applied to the country’s
current enterprises. The study will be based on publicly traded FMCG firms. Based on
the findings of this study, we can imagine how cash management affects the financial
success of FMCG companies.

1.7. NEED FOR THE STUDY

The importance of cash management in all facets of the company cannot be

emphasized. In the current inflationary economy, cash management may be more
critical than income management, and it necessitates the financial manager’s complete
attention and concentration. It necessitates close monitoring because each feature

17
necessitates a different treatment. Due to the urgency and complexity of the situation,
the consistent focus is dedicated to talent development, research, and economic trend
information. Working capital management is the most difficult and requires expert
management due to the government’s anti-inflationary strategy of ensuring a tight
financial condition. Many firms have acknowledged the importance of cash
management in the current period, necessitating internal and external experts’ analysis
and management of the new business scenario.

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 CHAPTER-II
REVIEW OF LITERATURE

2. REVIEW OF LITERATURE

Cash management

According to Njeru et al. (2015), cash management is a financial discipline that

follows the same principles regardless of the enterprise’s type of business, size, or
age. Cash management would focus on generating a sustainable cash flow by
predicting receipts and payments, arranging lines of credit with banks, and managing
the organization’s day-to-day operations to lower the amount of cash required to
achieve long-term business growth. Cash management is essential to avoid anomalies
in payment timing and cash availability. Many companies have partially built up
significant cash reserves and liquidity positions in their investment portfolios to meet
unforeseen costs partially. Drexler et al. (2014) discovered that both individuals and
business owners are frequently faced with difficult financial decisions in numerous
areas of life, whether personal or business-related. According to Akinyomi (2014),
how management prepares and controls cash flows determines the success of every
business venture. According to Horne and Wachowitz (2012), cash management is
crucial for manufacturing firms whose principal asset class is current assets. Cash is
an essential component of any organization and must be carefully managed. Due to
inefficient cash management, especially in high-growth or seasonal industries.

Kasim et al. (2015) discovered that cash management approaches impact small and
medium-sized businesses (SMEs). As a result, finance managers must employ
effective cash management processes to increase financial performance and secure
their continuous existence in an uncertain business environment. According to
Charitou, Elfani, and Lois (2010), optimum resource utilization necessitates managers
to identify effective and efficient handling of available cash for day-to-day operations.

According to Nyabwanga et al. (2012), efficient cash management calculates the

optimal quantity of cash by balancing the opportunity costs of holding too much
against the trade costs of holding too little. While cash management principles suggest
that finance managers maximize cash inflows and reduce cash outflows, both
positions incur costs. When cash inflows are accelerated, cash management and

19
collection expenses are projected to fall while profitability rises; nevertheless,
shortening the credit duration may negatively affect the sales, lowering revenue and
profit. According to Akiyomi (2014), postponing cash outflows may result in ethical
and reputational concerns and financial consequences.

Financial performance

The methods of a firm determine its ability to meet financial goals. The level of
success is defined by the company’s financial performance over a set period.
According to Alfred (2007), financial performance measures a firm entity’s ability to
earn money from its resources. Financial statements, which are a compilation of
reports on a company’s financial outcomes for a given period, are used to assess a
company’s financial performance. Financial performance is a metric used to describe
the financial position of an organization or the effects of management decisions made
by the organization’s members (Harash et al., 2013). Cash flow management practices
that govern working capital through customer cash receivables, inventory holdings,
and cash payments to suppliers are widely correlated with improved business
financial performance.

When Robert and Hamacher (2015) researched the effect of cash flow management
on mutual fund performance, they discovered that improving cash flows positively
affects financial performance. According to Adomako and Danso (2014),
Entrepreneurial business activities are jeopardized when entrepreneurs lack the
requisite financial management skills. According to Turcas (2011), a company’s
solvency, flexibility, and financial performance are all dependent on its ability to
create positive cash flows through operations, investment, and borrowing.

According to Waswa et al. (2018), one technique to assess financial success is to

conduct an in-depth examination and planning of funding liquidity management. As a
result, businesses should increase their operating cash flow to improve their
performance. According to Podilchuk (2013), a company’s financial optimization is
often done long-term and short-term. The former seeks to optimize the capital
structure or debt-to-equity ratio to maximize the firm’s value. The liquidity
management plan is at the heart of the short-term optimization approach. According
to Makokha (2017) and Odindo (2018), debt negatively affects the company’s
financial performance.

20
According to Akbas and Karaduman (2012) and Omondi and Muturi (2013), firm size
positively affects financial performance. Similarly, Wu et al. (2010) discovered that
excellent financial performance is required for long-term growth. According to Gao
(2010) and Miller et al. (2013), a firm’s financial performance is defined as the
profitability demonstrated by financial measurements. It has to do with making a
profit, surviving, and growing. Free cash flow is a financial statistic used to assess a
company’s financial success. It represents a company’s available cash after deducting
development and recurring expenses.

Cash management and financial performance

Ndirangu (2017) investigated the impact of cash management on the performance of

Nairobi Securities Exchange-listed companies. According to the findings, the size of
the business had a negative and minimal impact on financial performance. They have
focused their efforts on Nigerian manufacturing enterprises. Abioro (2013) revealed
that the mere presence of cash (liquidity) in the absence of effective management does
not always imply financial performance. A comparable study of Sri Lankan
manufacturing firms revealed a non-significant relationship between cash ratio and
financial performance and a non-significant relationship between cash turnover ratio
and financial performance (Janaki, 2016).

Furthermore, Yousef (2016) revealed that 67 percent of Jordanian SMEs were

inexperienced with financial control procedures. According to the studies mentioned
above, cash management may have little impact on financial performance. The
company’s growth rate appears to support this. The scenario is expected to change as
businesses grow. Cash holding practices, for example, and the use of technology in
cash management have a substantial impact on the financial success of Kenya’s small
and medium-sized firms. Cash management was discovered to substantially impact
Mogadishu’s private secondary schools (Mohamed & Omar, 2016). Similarly, Murkor
et al. (2018) discovered that operating cash flow management had a significant
positive impact on return on assets but a minor positive impact on return on equity.
The research looked into mutual funds in Kenya.

Studies related to topics

Pandey (2010) Cash studied refers to the money a person or company may instantly
pay without restriction. The word cash contains balance sheets of the corporation’s

21
coins, currencies, receipts, and bank statements. He maintains that cash items such as
marketable securities or bank deposits are also counted as cash.

Gitman’s (2008) principal focus is on cash distribution. Money is a feature of

accounts payable that includes all of the company’s cash spent over the financial
reporting period. Cash spent aims to track payments and cut payment costs for the
company.

Anil and Lakhsmi (2019) examine cash management as essential to the study’s past
and present financial status. The technique used for analyzing and interpreting the
data is a model analysis, ratio analysis, cash flow statement, and the least square
approach.

Akilesh and Chitra (2016) conducted an empirical study on the cash management
capacity required for the growth of the Tirupur clothing industry. The work
concentrates on two significant variables that lend themselves to straightforward
analysis: the output-based and the independent variables in cash management.
According to the study, the apparel industry will adopt a ‘true cash management’
approach that focuses on developing its strategy and decision-making process in
operations. Additionally, without careful monitoring, it was discovered that simply
having cash on hand does not always translate into positive results for manufacturing
companies. As a result, effective cash management is critical for increasing
performance.

According to Atla and Khaleel (2019), the primary objective of this analysis was to
establish the value of the CFS, also known as a cash flow statement, to evaluate an
organization’s financial statements. It was accomplished through an objective study,
which revealed that CFS research and analysis are required to conduct a thorough
analysis of its equity, economic, and financial situation. The experimental review was
conducted using data from Mercadona, a retail company. The following findings
conclude that the CFS is critical when conducting a detailed research review with
students studying business management and administration and accounting and
finance at the University of Victoria.

According to Pandey (2017), cash flow management is how a business collects and
manages cash and uses it for (short-term) investing. It is critical in ensuring a
business’s financial stability and solvency. Everything that is done financially affects

22
the business; every business must have cash on hand or have access to cash to pay for
the goods and services it consumes and, consequently, stay in business. Simply the
business must be capable of managing its day-to-day operations. Cash flow is a two-
way street in a business. Its operations continue to fluctuate in and out of business.
Because cash inflows and outflows never coincide, cash management is one of the
most effective tools for maintaining and managing cash, the king of business. Cash
management can be accomplished effectively by using various cash management
techniques that are currently in use. Various cash management techniques include
cash flow synchronization, collection acceleration, payment control, and cash flow
forecasting. A critical aspect of cash management that is unique is the time dimension
associated with cash movement. Cash management’s primary objective is to ensure
sufficient cash on hand when needed, not too much but never too little.

According to Das et al. (2016), cash is the lifeblood of any organization. Without cash
and cash management, a business cannot function. Cash movement is bidirectional,
involving both cash inflow and outflow. Cash management ensures that an
organization’s liquidity is sufficient to meet its daily obligations. Cash management
serves various purposes, including transactional, precautionary, speculative, and tax-
related. Firms with strong growth prospects and riskier cash flow mainly maintain a
high level of cash.

Alshammari (2020) analyzes the determinants of corporate cash position and business
performance for all non-financial firms. Panel regression models and GMMs were
employed for empirical analysis. The research found that large organizations
outperform smaller firms, especially those with less power. The amount and
significance of the cash level’s beneficial effect on corporate performance and value
remain unchanged when alternative levels of cash holdings and firm sizes are
considered.

Eton et al. (2019) discovered that cash flow does not affect profitability. Purposive
and stratified random sampling procedures were employed to collect data from 124
respondents in the Lira area. The goal was to investigate the impact of cash flow on
the profitability of business organizations in the Lira. The same study found that cash
management has no effect on financial performance and that most business owners
are incompetent.

23
Jama et al. (2017) conducted an empirical study on the impact of cash flow strategies
on profitability. The primary goal of this research was to determine the impact of cash
management procedures on the profitability of an organiZation. Correlation and
regression analysis were used to analyze the data. Solvene’s formula was also used in
this study. According to the study’s findings, cash budgeting has a significant impact
on the organizations’ profitability.

Goas (2020) highlighted the impact of WCM on corporate profitability. The primary
goal was to look into the relationship between working capital management and return
on assets in milk processing businesses. The study employed microdata from the
EMIS database for enterprises. Metrics for WCM included DSI, DSO, DPO, and
CCC. Extending the DSI and CCC negatively impacted ROA in dairy companies;
however, extending the DSO and DPO had a positive impact.

Parmar (2019) examined chosen organizations to undertake a comparative analysis of

CM techniques in the Indian corporate sector. The researcher computes seven ratios to
examine CM techniques based on the data obtained. Because many things change
automatically as industries evolve, this study discovered that the cash management
procedures of the selected samples differ significantly by industry. Some of the
companies chosen have good CM strategies. On the other hand, some firms must
enhance their CM procedures through corrective action and suitable cash management
policies.

Wadesango et al. (2019) investigate the impact of cash flow management on

profitability and sustainability. The primary goal was to categorize the cash flow
management strategies currently used by SMEs and determine their influence on their
profitability and sustainability. The chi-square test assessed and validated these data,
demonstrating that SMEs’ cash management strategies significantly impact
profitability and sustainability. Furthermore, the researcher discovered that most SMS
are unwilling to apply financial management strategies, resulting in success.

Yun et al. (2020) investigated how state ownership, corporate governance qualities,
family ownership, and ownership concentration link cash holdings and business
performance. The analysis relied on firm-level data from the Chinese Stock Exchange
and the Accounting Research Database. Using a correlation matrix, the study
discovered that firm-specific variables considerably alter the link between cash

24
holdings and performance. When a company has good corporate governance, it has
more cash. The study’s findings suggest that firm-specific variables influence the link
between cash holdings and firm performance.

According to Chang (2018), the free cash flow hypothesis demands management keep
cash assets to make investment decisions in the best interests of the shareholders.
Notably, it states that a company will only manage its investments and pursue those
that would result in better or enhanced financial performance if it has enough cash on
hand. On the other side, excessive cash holdings might lead to unproductive cash
investment decisions by management.

Luo and Shang (2015) discuss cash management using the CCC theory. He mentions
Gitmanin developing this hypothesis in 1974. Because this idea relates to the period
during which the firm invests in raw materials for output and subsequently to the
degree to which cash inflows are obtained, the notion claims that the business must
maintain cash in combination with its CCC. As a result, a smaller cash cycle can be
maintained with a shorter CCC than with a very lengthy cash cycle.

According to Javed (2019), its existing financial situation and commitments are
crucial to its cash management program. Cash will be required to fund loan
repayments where businesses have already borrowed a considerable amount.
Similarly, the total amount of loans held by the company may impact its posture and
standing, limiting its ability to receive more financial funds.

Bulin et al. (2016) examined companies listed on the stock exchange between 2011
and 2015, using ROA, CCC, Collection Period, and the inventory turnover ratio to
generate a more exact image of picture effects. The correlation value between CCC
and ROA was -0.06, indicating that while CCC increased financial performance,
manufacturers’ ROA fell because longer CCC necessitates more borrowing,
negatively influencing ROA. They discovered that the CCC has a strong relationship
with financial performance.

Jindal et al. (2017) investigated the indirect impact of cash management practices in
the heavy vehicle sectors of India. They observed a significant correlation of 0.415
between debtors management and cash, indicating that the extent to which a
corporation’s revenue can be increased is dependent on successful cash management.

25
Kumaraswamy (2016) determine the effect of WCM on several financial performance
factors for six years, from 2009 to 2014. They discovered that producers in GCC
countries spent disproportionately on current assets, which impacted their financial
performance due to their close association with cash borrowing. These dimensions
may account for about 61.4 percent of operating profits and 34 percent ROA.

Vuran and Adiloglu (2018) studied the implications of CM on the Istanbul stock
exchange in 2017. They discovered through regression that CM affects the
enterprise’s variables and receivables. They claim that organizations tend to focus on
receivables when they have financial issues, resulting in lower sales and financial
performance. According to this study, cash shortages in retail sectors have more
severe or negative financial implications than production shortages.

2.1. RESEARCH GAP

The majority of the literature assessed by the researcher focuses on the study variables
under slightly different settings than those used in the current study. According to the
research, most FMCG firms are listed in the stock market. This study does not
mention enabling characteristics such as security, financial institutions, legislation, or
order. As a result, this study is significant since it examines the variables in practice
(cash management and FMCG performance). This is the gap that the current research
attempts to fill. In the absence of enabling conditions, it describes how these variables
interact. Previous research, in contrast, has tended to focus on the causal relationship
between the variables, which is unconvincing for these variables.

2.2. CONCEPTUAL FRAMEWORK

Numerous empirical research on the effect of cash management on the financial

performance of firms have been undertaken, and various theories have been
developed in this field. This research aims to investigate the impact of cash
management on the financial performance of FMCG companies. The Baumol Model
Theory (1952), the Miller-Orr Cash Management Model (1970), and the Operating
Cycle Theory have been mentioned. The following theoretical framework has been
constructed based on the model above and theories.

26
27
 CHAPTER-III

RESEARCH METHODOLOGY

3. RESEARCH METHODOLOGY

This section outlines the methods utilized to collect and analyze data for the study. It
provides an overview of the data sources, the data analysis methodologies, and the
duration of the research. Additionally, the variable employed in the analysis and the
research limitations were discussed. The study is descriptive. It is logical to achieve a
successful and empirical conclusion when analyzing and assessing secondary data.
The statistics are shown in MS Excel and SPSS.

3.1. RESEARCH DESIGN

A research design is a structure for an inquiry that aids the researcher in gaining
answers to the specific objectives or research questions. According to Odoh and
Chinedum (2014), a study design is purpose-specific. The research design serves as
the framework for analyzing and collecting data in a study. In this study, the
descriptive research design was used to characterize the characteristics of the subject
population (Bono & McNamara, 2011). The researcher employed a descriptive
research approach to determine the relationship between cash management and the
FMCG firms’ financial performance. The independent variable in this study was cash
management. The dependent variables are used to evaluate financial performance.
The research provided valuable suggestions after investigating the effect of
independent variables on dependent variables

3.2. SAMPLING FRAME

A sampling frame is a group of elements from which a sample is drawn. It only

contains an accurate list of sample groups (Teddlie & Yu, 2007). The nine FMCG
firms listed on the Indian stock exchange served as the sampling frame. They are.

 HUL
 Nestle
 ITC
 Dabur

28
  Godrej consumer product
 Colgate
 Marico
 Emami
 P&G

3.3. SAMPLING TECHNIQUE

The sampling technique shown in the study was non-probability sampling.

Respondents have been selected using Sampling Convenience. Using this sampling
approach is due to time constraints and lack of information on the entire universe, and
the key reason is that it would not be easy to collect data from all the customers who
worked on this project.

3.4. SAMPLE SIZE

The sample size is the exact number of units in a studied population. Individuals,
animals, or specific occurrences may be included in the sample size (Etikan et al.,
2016). Due to the census nature of the study, all nine FMCG firms registered on the
stock exchange were included. The securities exchange provided the researcher with a
list of FMCG companies that are publicly traded on the bourse.

3.5. PERIOD OF STUDY

This study has taken data from annual reports and other records from 2016 to 2022 as
part of the investigation.

3.6. SOURCE OF INFORMATION

Data collected from secondary sources for the analysis was collected. FMCG
companies’ cash management is considered an independent variable, and financial
performance is dependent. Each variable taken from the income and balance sheet is
available on the website, such as “Money control, economic times, etc.”

3.7. DATA COLLECTION METHOD

29
The data collection method refers to the systematic process through which a
researcher collects data for a study (Church, 2001). Data is an essential component of
research. It sets the stage for the data analysis. This study examined secondary data.
Secondary data sources included published financial statements for all nine FMCG
firms listed on the Indian stock exchange between 2016 and 2022, journal articles,
and other relevant library sources (Johnston, 2014). A checklist was used to collect
data on the FMCG firms under investigation for the study.

3.8. STATISTICAL TOOLS

By applying different statistical methods, the data obtained have been appropriately
analyzed with Microsoft Excel and SPSS. The scientist primarily used the following
methods to analyze the collected data.
 Ratio Analysis
 Arithmetic mean
 Standard deviation
 Correlation
 Regression

3.9. VARIABLES

Dependent variable

1. Liquidity ratios
a. Current ratio

This tests the company’s short-term profitability. To measure the current ratio,
current assets and liabilities are needed. Current assets are easy to convert into cash
and include debtors, inventories, and marketable securities within a reasonable time.
Current liabilities are a painfully timely liability for unpaid expenses, income tax,
short-term bank loans, bills payable, and lenders.

b. Quick ratio

The relationship between net assets and current liabilities is illustrated. This measure
is measured using current assets except for existing liabilities in inventories. The
commodity becomes liquid in the acid test ratio, where the liquid assets will

30
automatically be converted into cash without any loss. This ratio determines the
company’s ability to fulfill its obligations.

2. Profitability ratios
a. Gross profit margin

This ratio describes the link between gross margin and revenue. When a company’s
gross profit to revenue ratio is high, it indicates that the product’s operating costs are
low. This is a positive indication of management. Additionally, it displays the highest
market value without corresponding increases in sales, which has the opposite effect.
The formula is gross profit is divided by revenue.

b. Net profit margin

This ratio indicates how much money the business must spend to convert each rupee
buy into net profits. It reveals the product’s management efficiency in manufacturing,
distribution, and sale. The formula is net income is divided by sales.

c. Operating profit margin

This ratio illustrates how a business may benefit from its operations. It is calculated
using the formula is operating profit is divided by net sales.

d. Return on asset

It displays how effectively a business can convert cash to net income or profits. The
formula is net income is divided by total assets.

e. Return on equity

This ratio indicates how effectively a corporation manages its shareholders’ capital. It
is calculated by using the net income divided by total equity.

Independent variable

a. Leverage

This ratio was determined with the help of the company’s overall debt by capital
employed. The overall debt includes long-term loans, short-term loans, debentures or
shares, various payment plans for purchasing equipment, and financial institutions.

b. Firm size

31
The size of a business is characterized as small, medium, or large based on the
number of workers, revenue, and whether the company is publicly listed or privately
held.

c. Cash to total asset

It depicts the relationship between cash and total assets. It assesses the ratio of
productive to unproductive assets and should be appropriately high—too high
suggests idle cash, resulting in lost opportunity revenue, and vice versa.

d. Operating cash flow

It refers to cash flows directly related to the production and selling of goods in normal
commercial operations. The CFO analyses if a company has enough cash to meet its
debts and operating expenses.

e. Investing cash flow

It shows the cash generated or spent on various investment-related activities over a

specific period. Investing activities include purchasing speculative assets, securities,
and the sale of securities or other assets.

f. Financing cash flow

It summarises the net cash flows used to fund its operations and capital. Financing
activities include issuing debt and shares and the payment of dividends. CFF
operations allow investors to examine a company’s financial strength and capital
structure management.

3.10. LIMITATIONS OF THE STUDY

This study used liquidity and profitability ratios to investigate the influence of cash
management on financial performance. Additional capabilities in this area, such as
cash flow, receipts, and payment processes, can be used to investigate the impact of
cash management on financial performance and produce more conclusive results. The
current study is limited to the FMCG sector and nine Indian companies; however,
there is plenty of room for future research in terms of sample size and sector of study.
Additional research can be undertaken by selecting organizations from other
industries.

32
 CHAPTER-IV

ANALYSIS OF DATA AND INTERPRETATION

4. ANALYSIS OF DATA AND INTERPRETATION

The present section provides detailed information on addressing the outcome through
statistical tools. Statistical tools like ratio analysis, descriptive statistics, correlation,
and regression were used. A detailed analysis of all the tools is described below.

Table 1: Current ratio of selected FMCG companies

Year HU Nestl ITC Dabu Godre Colgat Maric Emam P&G

L e r j e o i
FY15 1.05 1.68 2.05 1.25 0.89 0.8 2.03 3.63 3.45
FY 1.43 2.01 1.65 1.32 1.01 0.93 1.9 0.47 3.08
16
FY 1.3 2.64 3.59 1.48 1.17 0.87 2.44 0.49 3.31
17
FY 1.29 2.55 2.77 1.59 1.26 1.08 2.45 0.97 7.83
18
FY 1.36 1.74 3.07 1.4 1.12 0.96 2.35 1.44 3.8
19
FY 1.31 1.68 4.02 2.26 1.2 1.16 2.34 1.35 4.21
20
FY 1.26 1.05 3.13 1.39 1.55 0.85 2.11 1.83 3.04
21
Mean 1.29 1.91 2.90 1.53 1.17 0.95 2.23 1.45 4.10
SD 0.12 0.55 0.83 0.34 0.21 0.13 0.22 1.08 1.69
CV 9.2 28.9 28.6 22.3 17.8% 13.6% 9.7% 74.4% 41.3
% % % % %
It is observed from the above table that the current ratio has an ideal value is 2:1,
indicating the selected companies show a fluctuating trend. However, the mean value
of the current ratio for HUL is 1.29, and Nestle has 1.91. ITC has 2.90, Dabur has
1.53, Godrej has 1.17, Colgate has 0.95, Marico has 2.23, Emami has 1.45 and P&G
has 4.10. The result shows that ITC, Marico, and P&G have value greater than the

33
ideal value, which shows that the companies mentioned above are not properly
investing their short-term assets. In addition, HUL, Nestle, Dabur, Godrej, and Emami
have a value between 1.2 and 2.0 and indicate the mentioned companies are
considered healthy. The CV analysis result indicates that the HUL has more stable
than the other.

Figure 1: Current ratio of selected FMCG companies

34
 Table 2: Quick ratio of selected FMCG companies

Year HUL Nestl ITC Dabu Godre Colgat Maric Emam P&G
e r j e o i
FY15 0.76 1.12 1.38 0.81 0.57 0.5 0.9 3.22 2.45
FY 1.05 1.43 1.07 0.91 0.55 0.58 1.03 0.3 2.28
16
FY 0.97 2.03 2.44 0.98 0.8 0.57 1.11 0.23 2.61
17
FY 1.02 2.03 1.95 1.02 0.91 0.85 1.07 0.64 7.25
18
FY 1.07 1.16 2.28 0.92 0.74 0.72 1.28 0.97 3.29
19
FY 1.02 1.11 3.13 1.7 0.81 0.82 1.31 0.96 3.62
20
FY 0.95 0.45 2.2 0.84 0.98 0.64 1.45 1.29 2.55
21
Mean 0.98 1.33 2.06 1.03 0.77 0.67 1.16 1.09 3.44
SD 0.10 0.56 0.68 0.31 0.16 0.13 0.19 1.01 1.75
CV 10.7 42.1 33.2 29.8 21.0% 19.8% 16.3% 93.3% 50.9
% % % % %

The table above shows that the quick ratio has an ideal value of 1:1, which implies
that the selected companies reveal a fluctuating trend. It is found that the average
value of the quick ratio for HUL is 0.98, and Nestle has 1.33. ITC has 2.06, Dabur has
1.03, Godrej has 0.77, Colgate has 0.67, Marico has 1.01, Emami has 1.09 and P&G
has 3.44. The result reveals that Nestle, ITC, Marico, and P&G, which means that the
companies mentioned above have a mean value greater than the ideal value, which
means that the company has better liquidity and good financial health. Besides,
Dabur, Godrej, Colgate, HUL, and Emami have a mean value equal to one, which
means that the companies mentioned above have enough liquid assets to meet their
short-term obligations. The CV analysis result indicates that the HUL has more stable
than the other.

35
Figure 2: Quick ratio of selected FMCG companies

36
 Table 3: Gross profit margin of selected FMCG companies

Year HUL Nestl ITC Dabur Godre Colgat Maric Emam P&G
e j e o i
FY15 15.86 16.47 36.55 19.89 22.21 17.986 17.91 18.57 6.004
6 6 8 2 6 2 2
FY 17.06 17.42 35.98 19.88 22.77 19.334 17.61 17.97 8.885
16 8 4 1 4 5 8
FY 17.72 17.52 33.77 19.58 22.73 20.35 18.39 18.87 10.07
17
FY 19.69 20.2 35.43 20.14 24.08 22.82 16.4 16.74 14.96
18
FY 21.22 20.66 35.54 20.06 25.41 24.13 15.17 15.42 20.11
19
FY 22.33 21.2 35.82 19.82 24.95 22.18 17.2 11.12 21.09
20
FY 22.41 21.76 30.69 19.7 25.09 27.41 16.52 18.67 21.41
21
Mean 19.47 19.32 34.83 19.87 23.89 22.03 17.03 16.77 14.65
SD 2.64 2.12 2.02 0.19 1.31 3.17 1.09 2.78 6.40
CV 13.5 11.0 5.8% 1.0% 5.5% 14.4% 6.4% 16.6% 43.7
% % %
It is noted from the above table that the gross profit margin of selected companies
indicates a fluctuating trend. The study observed that the mean value of GPM for
HUL is 19.47, and Nestle has 19.32. ITC has 34.83, Dabur has 19.87, Godrej has
23.89, Colgate has 22.03, Marico has 17.03, Emami has 16.77 and P&G has 14.65.
Therefore, it is found that the GPM of ITC is higher than 25%, which implies a good
sign for the companies. Also, the FMCG Company such as HUL, Nestle, Dabur,
Godrej, Colgate, Marico, Emami, and P&G is less than 25% and shows a bad sign.
The CV analysis result indicates that the Dabur has more stable than the other. As a
result, ITC indicated that the company had good management over its sales. In
contrast, the other companies lose their revenues and do not effectively use their
materials and labor and revealing their weak financial condition.

37
Figure 3: Gross profit margin of selected FMCG companies

38
 Table 4: Net profit margin of selected FMCG companies

Year HUL Nestl ITC Dabu Godre Colgat Maric Emam P&G
e r j e o i
FY15 14 6.88 26.3 14.04 14.77 14.03 11.64 23.22 5.7
1
FY 13.31 10.04 26.7 16.33 15.37 13.85 14.18 13.7 7.61
16 2
FY 14.07 12.24 25.4 18.86 17.85 14.5 17.37 15.04 8.5
17 4
FY 15.16 14.23 27.6 19.17 19 16.07 13.89 13.14 98.79
18 2
FY 15.79 15.91 27.7 20.15 30.9 17.37 18.9 12.29 17.13
19
FY 17.37 15.59 33.1 18.54 21.55 18.04 17.2 12.09 18.73
20 7
FY 17.29 14.58 28.6 19.23 19.57 21.38 17.45 18.39 17.52
21 5
Mean 15.28 12.78 27.9 18.05 19.86 16.46 15.80 15.41 24.85
4
SD 1.62 3.31 2.53 2.12 5.41 2.72 2.59 4.06 33.04
CV 10.6 25.9 9.1% 11.8 27.2% 16.5% 16.4% 26.3% 132.9
% % % %

The above table indicates that the net profit margin of selected companies indicates a
fluctuating trend. The study observed that the mean value of NPM for HUL is 15.28,
and Nestle has 12.78. ITC has 27.94, Dabur has 18.05, Godrej has 19.86, Colgate has
16.46, Marico has 15.80, Emami has 15.41 and P&G has 24.85. Hence, the result
shows that the NPM of the selected FMCG companies is considered a good profit
margin. The CV analysis result indicates that the ITC has more stable than others. As
a result, it can be observed that ITC is more efficient in making a profit.
Simultaneously, the other companies are managed better, resulting in a high net profit
ratio.

39
Figure 4: Net profit margin of selected FMCG companies

40
 Table 5: Operating profit margin of selected FMCG companies

Year HUL Nestl ITC Dabur Godre Colgat Maric Emam P&G
e j e o i
FY15 16.40 20.13 38.68 21.14 23.28 21.146 18.95 31.02 9.604
4 6 2 4 4 4 6
FY 17.90 20.91 38.33 21.27 23.89 22.643 18.79 30.64 12.25
16 2 3 5 8 8 2 7
FY 18.96 20.94 36.36 21 23.93 23.69 19.71 32.1 14.02
17
FY 21.07 23.18 38.25 21.97 25.28 26.56 17.69 29.71 17.45
18
FY 22.59 23.65 38.46 21.79 26.63 27.69 16.91 28.22 21.97
19
FY 24.75 23.98 39.24 21.88 26.44 26.55 19.13 24.77 23.26
20
FY 24.61 24.41 34.12 21.7 26.42 31.18 18.21 32.65 24.38
21
Mean 20.90 22.46 37.64 21.54 25.13 25.64 18.49 29.87 17.56
SD 3.28 1.74 1.79 0.39 1.42 3.40 0.95 2.69 5.81
CV 15.7 7.7% 4.8% 1.8% 5.6% 13.3% 5.1% 9.0% 33.1
% %

It is noted from the above table that the operating profit margin of selected FMCG
companies shows a ratio is in fluctuation. The average value of OPM shows an HUL
has 20.90, Nestle has 22.46, ITC has 37.64, Dabur has 21.54, Godrej has 25.13,
Colgate has 25.64, Marico has 18.49, Emami has 29.87, and P&G has 17.56. Hence,
the result shows that the OPM of the ITC is considered a good profit margin.
However, the remaining companies are considered a bad sign and have bad financial
strength. So, the CV analysis result indicates that the Dabur has more stable than the
other. As a result, ITC is more favorable and operates efficiently. Still, other
companies receive enough from their continuing activities to offset their variable and
fixed costs.

41
Figure 5: Operating profit margin of selected FMCG companies

42
 Table 6: Return on asset of selected FMCG companies

Year HUL Nestl ITC Dabu Godre Colgat Maric Emam P&G
e r j e o i
FY15 31.65 9.26 21.7 20.67 13.29 32.84 16.87 30.31 6.83
3
FY 29.71 13.61 19.8 21.08 14.71 29.66 20.09 13.09 8.59
16 8
FY 30.43 16.64 18.8 19.13 13.75 24.99 22.39 14.18 9.47
17 1
FY 30.53 19.86 17.9 18.44 15.09 26.26 17.86 11.91 47.66
18 9
FY 33.78 27.44 17.8 22.66 26.33 29.52 23.72 11.81 14.88
19 5
FY 34.37 26.36 20.1 19.18 16.99 31.35 24.34 11.87 21.61
20 1
FY 11.67 26.12 18.2 18.41 15.9 35.77 24.67 20.62 17.92
21
Mean 28.88 19.90 19.2 19.94 16.58 30.06 21.42 16.26 18.14
2
SD 7.79 7.08 1.42 1.58 4.48 3.71 3.17 6.94 14.07
CV 27.0 35.6 7.4% 7.9% 27.0% 12.3% 14.8% 42.7% 77.6
% % %

The table above shows that the ROA implies that the selected companies reveal a
fluctuating trend. It is found that the average value of ROA for HUL is 28.88, and
Nestle has 19.90. ITC has 19.22, Dabur has 19.94, Godrej has 16.58, Colgate has
30.06, Marico has 21.42, Emami has 16.26 and P&G has 18.14. Therefore, it is found
that Colgate and HUL have the highest mean value, which means that the company
has more capital efficiency. Besides, the other companies cannot have high capital
efficiency. The CV results show that the ITC has more stable than others. As a result,
the ROA of Colgate and HUL depicts a firm’s management’s efficiency in generating

43
Net Income from all resources, and a low ROA suggests that the company is an asset-
intensive corporation.

Figure 6: Return on assets of selected FMCG companies

44
 Table 7: Return on equity of selected FMCG companies

Year HUL Nestle ITC Dabu Godre Colgat Maric Emam P&G
r j e o i
FY15 115.8 19.98 31.31 32.64 19.34 72.56 23.26 38.9 9.05
7
FY 65.88 30.74 29.94 32.71 19.34 56.55 27.01 24.25 11.75
16
FY 69.18 35.81 22.49 27.29 19.38 45.33 28.81 20.22 12.8
17
FY 74.02 43.74 21.83 25.36 21.54 44.16 23.61 15.7 54.45
18
FY 78.8 102.5 21.5 31.85 35.62 53.6 32.35 14.78 19.43
19 8
FY 83.89 103.1 23.63 25.58 23.01 51.21 34.86 16.04 28.03
20 2
FY 16.76 102.8 22.08 25.63 19.25 88.8 36.44 27 25.12
21 9
Mean 72.06 62.69 24.68 28.72 22.50 58.89 29.48 22.41 22.95
SD 29.48 38.23 4.13 3.51 5.97 16.20 5.25 8.61 15.58
CV 40.9 61.0 16.7 12.2 26.5% 27.5% 17.8% 38.4% 67.9
% % % % %

The table above shows that the ROE implies that the selected companies reveal a
fluctuating trend. It is found that the average value of ROE for HUL is 72.06, and
Nestle has 62.69. ITC has 24.68, Dabur has 28.72, Godrej has 22.50, Colgate has
58.89, Marico has 29.48, Emami has 22.41 and P&G has 22.95. Therefore, it is found
that the HUL has the highest mean value, which means that the company has more
capital efficiency. Besides, the other companies cannot have high capital efficiency.
The CV analysis shows that the Dabur has the lowest CV, which has a consistent
performance compared to others. As a result, the selected FMCG companies do not
have a good performance.

45
Figure 7: Return on equity of selected FMCG companies

46
 Table 8: Leverage of selected FMCG companies

Year HU Nestl ITC Dabu Godrej Colgat Maric Emami P&

L e r e o G
FY15 0 0.003 0.001 0.035 0.000 0.000 0.055 0.005 0
FY 0 0.005 0.001 0.019 0.001 0.000 0.007 0.264 0
16
FY 0 0.005 0.000 0.054 0.024 0.000 0.029 0.055 0
17
FY 0 0.004 0.000 0.049 0.000 0.000 0.030 0.108 0
18
FY 0 0.007 0.000 0.024 0.000 0.030 0.028 0.021 0
19
FY 0 0.004 0.000 0.019 0.046 0.000 0.027 0.065 0
20
FY 0 0.004 0.000 0.023 0.000 0.000 0.032 0.020 0
21
Mean 0 0.00 0.00 0.03 0.01 0.00 0.03 0.08 0
SD 0 0.00 0.00 0.01 0.02 0.01 0.01 0.09 0
CV 0.0 28.9 96.1 45.9 179.6 264.6 46.8% 116.2 0.0
% % % % % % % %

It is indicated from the above table that the leverage of the selected FMCG companies
shows a fluctuating trend. The mean value of HUL has 0; Nestle has 0.00, ITC has
0.00, Dabur has 0.03, Godrej has 0.01, Colgate has 0.00, Marico has 0.03, Emami has
0.08, and P&G has 0. Hence, it is concluded that the highest mean value indicates the
Emami. The CV analysis shows that the HUL and P&G have the lowest CV, which
has a consistent performance compared to others.

47
Figure 8: Leverage of selected FMCG companies

48
 Table 9: Firm Size of selected FMCG companies

Year HUL Nestle ITC Dabur Godrej Colgate Marico Emami P&G
FY15 4.13 3.78 4.65 3.57 3.69 3.23 3.51 3.19 2.89
FY 16 4.14 3.83 4.69 3.65 3.70 3.29 3.54 3.40 2.95
FY 17 4.17 3.87 4.73 3.72 3.79 3.36 3.58 3.39 3.00
FY 18 4.23 3.91 4.80 3.76 3.82 3.41 3.60 3.41 3.25
FY 19 4.25 3.86 4.84 3.75 3.82 3.42 3.68 3.41 3.03
FY 20 4.29 3.90 4.88 3.79 3.84 3.42 3.62 3.39 3.07
FY 21 4.83 3.91 4.85 3.88 3.89 3.46 3.65 3.36 2.99
Mean 4.29 3.87 4.78 3.73 3.79 3.37 3.60 3.36 3.02
SD 0.24 0.05 0.09 0.10 0.07 0.08 0.06 0.08 0.11
CV 5.7% 1.2% 1.8% 2.7% 1.9% 2.4% 1.6% 2.3% 3.7%
It is noted from the above table that the firm size of the selected FMCG companies
shows a fluctuating trend. The mean value of HUL has 4.29, Nestle has 3.87, ITC has
4.78, Dabur has 3.73, Godrej has 3.79, Colgate has 3.37, Marico has 3.60, Emami has
3.36, and P&G has 3.02. Hence, it is concluded that the highest mean value indicates
the ITC. The CV analysis shows that Nestle has the lowest CV, which has a consistent
performance.

Figure 9: Firm Size of selected FMCG companies

49
 Table 10: Cash to total asset of selected FMCG companies

Year HUL Nestl ITC Dabur Godrej Colgat Maric Emam P&G
e e o i
FY15 0.19 0.08 0.17 0.03 0.10 0.15 0.03 0.21 0.24
FY 0.20 0.13 0.13 0.01 0.03 0.15 0.04 0.03 0.32
16
FY 0.11 0.20 0.05 0.01 0.02 0.13 0.02 0.00 0.28
17
FY 0.20 0.20 0.04 0.01 0.01 0.18 0.02 0.01 0.71
18
FY 0.21 0.18 0.05 0.02 0.01 0.15 0.07 0.04 0.53
19
FY 0.26 0.22 0.09 0.09 0.01 0.16 0.02 0.02 0.54
20
FY 0.06 0.09 0.06 0.11 0.01 0.30 0.16 0.13 0.48
21
Mean 0.17 0.16 0.09 0.04 0.03 0.17 0.05 0.06 0.44
SD 0.06 0.06 0.05 0.04 0.03 0.06 0.05 0.08 0.17
CV 37.0 36.1 58.0 101.0 114.1 33.1% 101.7 120.6 38.3
% % % % % % % %

It is observed from the above table that the cash to total asset ratio has an ideal value
is 1:1, indicating the selected companies show a fluctuating trend. However, the mean
value of the cash to total asset ratio for HUL is 0.17, and Nestle has 0.16. ITC has
0.09, Dabur has 0.04, Godrej has 0.03, Colgate has 0.17, Marico has 0.05, Emami has
0.06 and P&G has 0.44. The result shows that the selected FMCG companies have a
mean value of higher than one, which indicates that they can pay off their short-term
obligations with their most liquid asset. The CV analysis result indicates that Colgate
has more stable than others.

50
Figure 10: Cash to the total asset of selected FMCG companies

51
 Table 11: Operating cash flow of selected FMCG companies

Year HUL Nestle ITC Dabur Godre Colga Maric Ema P&G
j te o mi
FY1 8957. 0.00 11493. 1704. 1374. 783.8 1682. 878.4 247.2
5 00 95 17 02 6 00 0 6
FY 3103. 1098. 9308.8 839.2 782.6 638.1 552.0 496.6 83.66
16 76 10 7 0 6 5 5 2
FY 3974. 1465. 9251.3 960.2 511.2 672.9 656.7 534.2 107.0
17 00 91 5 9 0 3 3 6 4
FY 4953. 1817. 10002. 926.9 1177. 688.0 470.6 714.7 53.66
18 00 79 02 4 18 0 9 1
FY 5916. 2052. 12650. 813.6 1235. 693.9 418.5 577.4 -
19 00 45 85 7 44 3 7 1 130.3
8
FY 5728. 2233. 11749. 1123. 1082. 983.0 785.0 512.6 0.00
20 00 67 05 57 16 0 0 1
FY 7305. 2454. 13806. 1154. 919.9 929.5 970.0 545.7 235.3
21 00 48 18 77 8 8 0 9 7
Mea 5705. 1588. 11180. 1074. 1011. 769.9 790.7 608.5 85.23
n 25 91 32 66 81 2 2 4
SD 1979. 837.9 1736.4 306.4 295.8 135.6 436.3 139.1 131.6
43 4 3 7 2 1 5 9 7
CV 34.7% 52.7% 15.5% 28.5% 29.2% 17.6 55.2% 22.9 154.5
% % %

It is noted from the above table that the operating cash flow of the selected FMCG
companies shows a fluctuating trend. The mean value of HUL has 5705.25, and
Nestle has 1588.91, ITC has 11180.32, Dabur has 1074.66, Godrej has 1011.81,
Colgate has 769.92, Marico has 790.72, Emami has 608.54 and P&G has 85.23.
Hence, it is concluded that the highest mean value indicates the ITC. The CV analysis
shows that the ITC has the lowest CV, which has a consistent performance compared
to others.

52
Figure 11: Operating cash flow of selected FMCG companies

53
 Table 12: Investing cash flow of selected FMCG companies

Year HUL Nestle ITC Dabur Godre Colga Maric Emam P&G
j te o i
FY1 448.0 -70.48 - - - - 59.58 - -
5 4 4822.5 616.1 453.7 271.6 224.4 68.03
7 7 9 3 1
FY -51 - - - 1.31 - - - -
16 127.4 3750.3 497.6 236.6 130.1 1298. 74.97
1 3 4 2 6 74
FY -752 - - - - - 87.48 - -
17 130.5 2780.3 682.1 1008. 342.1 260.5 47.63
6 3 2 43 6 5
FY -1264 -52.41 - - - - 177.3 -237.4 1269.
18 6691.2 262.3 302.4 207.3 8 72
4 8 2 4
FY -264 82.99 - 416.7 459.9 - -79 20.18 0
19 5081.7 1 9 95.71
5
FY 1926 - - - - - 128 - 164.6
20 321.4 5516.7 331.5 191.3 18.66 251.3 4
6 1 4 6 9
FY -1367 0 6497.8 - - 71.35 -641 - -
21 9 1121. 1019. 199.9 32.27
4 1 6
Mea - -88.48 - - - - -56.82 - 173.0
n 189.1 3163.5 442.0 359.1 157.2 350.3 7
4 8 8 1 5 2
SD 1137. 126.7 4439.3 471.6 532.0 147.9 280.0 429.3 490.4
54 7 8 1 3 5 3 1 4
CV - - - - - - - - 283.4
601.4 143.3 140.3 106.7 148.2 94.1 492.9 122.5 %
% % % % % % % %

54
It is noted from the above table that the investing cash flow of the selected FMCG
companies shows a fluctuating trend. The mean value of HUL has -189.14, and Nestle
has -88.48, ITC has -3163.58, Dabur has -442.08, Godrej has -359.11, Colgate has -
157.25, Marico has -56.82, Emami has -350.32 and P&G has 173.07. Hence, it is
concluded that the highest mean value indicates the P&G. The CV analysis shows that
the HUL has the lowest CV, which has a consistent performance compared to others.

Figure 12: Investing cash flow of selected FMCG companies

55
 Table 13: Financing cash flow of selected FMCG companies

Year HUL Nestle ITC Dabur Godr Colga Maric Emam P&G
ej te o i
FY1 - - - - - - - - -11.92
5 3450.4 498.32 4573.6 336.7 309.3 384.7 612.1 220.7
4 1 5 6 9 5 4
FY -4008 - - - - - - 502.9 -14.98
16 666.55 5461.5 451.4 541.5 375.7 532.3 9
2 7 1 8 2
FY -4264 - - - - - - - -21.98
17 996.62 7137.6 273.6 121.1 340.5 560.0 518.5
2 6 8 3 1 7
FY -4651 - - - - - - - -30.05
18 1317.4 6019.8 493.4 934.9 379.7 602.2 330.9
2 5 4 1 7 8 3
FY -5462 - - - - - -704 - 0
19 3539.9 6600.5 1619. 1548. 814.6 434.1
5 7 39 5 8 5
FY -6676 - - -826 - - -1081 - -
20 1955.8 7890.8 744.5 891.1 399.1 883.4
9 7 5 7 1
FY -9280 0 - - - - -1052 - -
21 18378. 555.0 355.8 956.4 678.7 386.6
89 4 6 6 7 3
Mea - - - - - - - - -
n 5398.7 1282.1 8008.9 650.8 650.8 591.8 734.8 297.0 192.7
8 1 9 2 4 7 2 5 1
SD 2011.4 1174.1 4700.0 462.4 481.5 279.8 232.9 381.0 334.5
8 4 0 9 6 3 4 2 9
CV - - -58.7% - - - - - -
37.3% 91.6% 71.1 74.0 47.3 31.7 128.3 173.6
% % % % % %

56
It is observed from the above table that the financing cash flow of the selected FMCG
companies shows a fluctuating trend. The mean value of HUL has -5398.78, and
Nestle has -1282.11, ITC has -8008.99, Dabur has -650.82, Godrej has -650.84,
Colgate has -591.87, Marico has -734.82, Emami has -297.05 and P&G has -192.71.
Thus, it is found that the highest mean value indicates the P&G. The CV analysis
shows that the HUL has the lowest CV, which has a consistent performance compared
to others.

Figure 13: Financing cash flow of selected FMCG companies

57
 Table 14: Descriptive statistics

Particular Mean SD Skewness Kurtosis

Current ratio 1.95 .28 .45 .770
Quick ratio 1.39 .26 .71 .741
Gross Profit Margin 20.87 1.35 -.13 -1.767
Operating Profit Margin 24.36 1.52 -.100 -1.507
Net Profit Margin 18.49 4.11 1.16 1.656
Return On Asset 21.15 1.85 -.21 -2.040
Return On Equity 38.26 4.84 -.44 -1.589
Leverage .01 .008 1.14 1.477
Size 3.75 .081 -.45 -.178
Cash to total asset .13 .024 -1.09 .415
Operating Cash Flow 2535.04 483.63 -.19 -1.514
Investing Cash Flow -514.85 354.67 2.03 4.73
Financing Cash Flow -1978.66 822.27 -1.15 1.08

The study used the descriptive statistics of the dependent and independent variables
used in the selected FMCG companies. The researcher used the dependent variable
such as liquidity (Current and quick ratio) and profitability ratio (GPM, NPM, OPM,
ROA, and ROE). In contrast, the independent variables are considered cash
management practices (Leverage, size, and cash to total asset, operating cash flow,
investing cash flow, and financing cash flow). It represents the mean and standard
deviation for the variable from 2016 to 2022 in the study.
The current ratio has a mean value of 1.95, which implies that it is less than the
standard value and reveals that FMCG companies have the strong financial strength
and satisfy their short-term obligations. On the other hand, the quick ratio has an
average value of 1.39, which is greater than one and indicates the company has
enough liquid assets. In addition, GPM has a mean value of 20.87, which means that
the value is less than 25% and indicates a bad sign for the selected FMCG companies.
Besides, OPM has an average value of 24.36, which means that the value is higher
than 25% and shows the company is considered good. NPM has a mean value of
18.49, indicating that the value is considered a good and the company has priced its
product correctly.

58
Furthermore, ROA has a mean value of 21.15, which means that the selected
companies are considered good, and ROE has a mean value of 38.26, which shows
that the company does not have a better performance. The leverage value has an
average value of 0.01, indicating that the company can secure the loan with a lower
leverage value. However, the firm size has a mean value of 3.75; the cash to the total
asset has a mean value of 0.13; operating cash flow has a mean value of 2535.04; the
investing cash flow has a mean value of -514.85, and the financing cash flow has a
mean value of -1978.66.

Figure 14: Descriptive statistics

59
 Table 15: Correlation between the cash management practices and financial performance of FMCG companies

Particulars Levera Size Cash to Operating Investing Financing Financial

ge total asset Cash Flow Cash Flow Cash Flow Performance
Leverage r- 1 -.302 -.390 -.875 -.555 .547 -.477
value
Sig. .510 .388 .010 .196 .204 .280
Size r- 1 .567 .277 .626 -.873 .721
value
Sig. .185 .548 .133 .010 .068
Cash to total r- 1 .671 .386 -.565 .876
asset value
Sig. .099 .393 .187 .010
Operating Cash r- 1 .636 -.585 .549
Flow value
Sig. .125 .167 .202
Investing Cash r- 1 -.909 .291
Flow value
Sig. .005 .526
Financing Cash r- 1 -.606
Flow value
Sig. .149
Financial r- 1
Performance value

60
As we have seen, the correlation analysis is used to determine the relationship
between the cash management practices and the financial performance of FMCG
companies. The researcher considers the cash management practices such as leverage,
size, cash to total asset, operating cash flow, investing cash flow, and financing cash
flow in the study. However, the leverage is negatively correlated with FP (r-value = -
0.477; p>5%), size is positively associated with FP (r-value = 0.721; p>5%), whereas
operating cash flow positively associated with FP (r-value = 0.549; p>5%), investing
cash flow positively associated with FP (r-value = 0.291; p>5%), and financing cash
flow negatively correlated with FP (r-value = -0.606; p>5%) and it is not statistically
significant. Also, the correlation value of the cash to asset ratio is 0.876 (p<5%), and
the significance value is less than 5%, which is statistically significant. As a result, all
the cash management practices are not associated with the FP, but the cash to asset
ratio is positively associated.
Table 16: Correlation between the cash management and financial performance
of FMCG companies

Cash management FP
Cash management r-value 1 -.255
Sig. .581
FP r-value 1

The above table notes that the correlation reveals that cash management is negatively
associated with financial performance and is not statistically significant. However, the
r-value is -0.255, whereas the significance value is greater than 5%, which is not
statistically significant to financial performance.

61
 Table 17: Impact of cash management on financial performance

Model R R2 Adjusted R2 SEE

1 .255a .065 -.122 1.26128
The model summary table shows that the r-value of cash management and financial
performance is 0.255. These R-values reveal the relationship between cash
management and financial performance is low. After evaluating the relationship, R2
shows the variation of cash management on financial performance. At present, cash
management has a 6.5% variation in financial performance.

Model SS df MS F Sig.
1 Regression .555 1 .555 .349 .581b
Residual 7.954 5 1.591
Total 8.509 6
The ANOVA table shows that the F-value of the variable is 0.349 and the significance
value is 0.581, which shows that the value is greater than 5%. Thus, the result shows
that the present value is sufficient to predict financial performance.

Model USC SC t Sig.

B SE B
1 C 13.176 .479 27.511 .000
Cash management -.004 .006 -.255 -.590 .581
The regression results reveal that the beta value is -0.255, the t-value is -0.590, and
the significance value is 0.581 (p>5%). Hence, it is concluded that the cash
management does not affect the financial performance, and it is not statistically
significant

62
 CHAPTER-V

SUMMARY OF FINDINGS, SUGGESTIONS, AND

CONCLUSIONS

5. SUMMARY OF FINDINGS, SUGGESTIONS, AND

CONCLUSIONS

5.1. FINDINGS

 The mean value of the current ratio for HUL is 1.29, and Nestle has 1.91. ITC
has 2.90, Dabur has 1.53, Godrej has 1.17, Colgate has 0.95, Marico has 2.23,
Emami has 1.45 and P&G has 4.10. The result shows that ITC, Marico, and
P&G have value greater than the ideal value, which shows that the companies
mentioned above are not properly investing their short-term assets. In addition,
HUL, Nestle, Dabur, Godrej, and Emami have a value between 1.2 and 2.0
and indicate the mentioned companies are considered healthy. The CV
analysis result indicates that the HUL has more stable than the other.
 It is found that the average value of the quick ratio for HUL is 0.98, and Nestle
has 1.33. ITC has 2.06, Dabur has 1.03, Godrej has 0.77, Colgate has 0.67,
Marico has 1.01, Emami has 1.09 and P&G has 3.44. The result reveals that
Nestle, ITC, Marico, and P&G, which means that the companies mentioned
above have a mean value greater than the ideal value, which means that the
company has better liquidity and good financial health. Besides, Dabur,
Godrej, Colgate, HUL, and Emami have a mean value equal to one, which
means that the companies mentioned above have enough liquid assets to meet
their short-term obligations. The CV analysis result indicates that the HUL has
more stable than the other.
 The study observed that the mean value of GPM for HUL is 19.47, and Nestle
has 19.32. ITC has 34.83, Dabur has 19.87, Godrej has 23.89, Colgate has
22.03, Marico has 17.03, Emami has 16.77 and P&G has 14.65. Therefore, it
is found that the GPM of ITC is higher than 25%, which implies a good sign
for the companies. Also, the FMCG Company such as HUL, Nestle, Dabur,
Godrej, Colgate, Marico, Emami, and P&G is less than 25% and shows a bad
sign. The CV analysis result indicates that the Dabur has more stable than the

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 other. As a result, ITC indicated that the company had good management over
its sales. In contrast, the other companies lose their revenues and do not
effectively use their materials and labor and revealing their weak financial
condition.
 The study observed that the mean value of NPM for HUL is 15.28, and Nestle
has 12.78. ITC has 27.94, Dabur has 18.05, Godrej has 19.86, Colgate has
16.46, Marico has 15.80, Emami has 15.41 and P&G has 24.85. Hence, the
result shows that the NPM of the selected FMCG companies is considered a
good profit margin. The CV analysis result indicates that the ITC has more
stable than others. As a result, it can be observed that ITC is more efficient in
making a profit. Simultaneously, the other companies are managed better,
resulting in a high net profit ratio.
 The average value of OPM shows an HUL has 20.90, Nestle has 22.46, ITC
has 37.64, Dabur has 21.54, Godrej has 25.13, Colgate has 25.64, Marico has
18.49, Emami has 29.87, and P&G has 17.56. Hence, the result shows that the
OPM of the ITC is considered a good profit margin. However, the remaining
companies are considered a bad sign and have bad financial strength. So, the
CV analysis result indicates that the Dabur has more stable than the other. As
a result, ITC is more favorable and operates efficiently. Still, other companies
receive enough from their continuing activities to offset their variable and
fixed costs.
 It is found that the average value of ROA for HUL is 28.88, and Nestle has
19.90. ITC has 19.22, Dabur has 19.94, Godrej has 16.58, Colgate has 30.06,
Marico has 21.42, Emami has 16.26 and P&G has 18.14. Therefore, it is found
that Colgate and HUL have the highest mean value, which means that the
company has more capital efficiency. Besides, the other companies cannot
have high capital efficiency. The CV results show that the ITC has more stable
than others. As a result, the ROA of Colgate and HUL depicts a firm’s
management’s efficiency in generating Net Income from all resources, and a
low ROA suggests that the company is an asset-intensive corporation.
 It is found that the average value of ROE for HUL is 72.06, and Nestle has
62.69. ITC has 24.68, Dabur has 28.72, Godrej has 22.50, Colgate has 58.89,
Marico has 29.48, Emami has 22.41 and P&G has 22.95. Therefore, it is found

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 that the HUL has the highest mean value, which means that the company has
more capital efficiency. Besides, the other companies cannot have high capital
efficiency. The CV analysis shows that the Dabur has the lowest CV, which
has a consistent performance compared to others. As a result, the selected
FMCG companies do not have a good performance.
 The leverage of the selected FMCG companies shows a fluctuating trend. The
mean value of HUL has 0; Nestle has 0.00, ITC has 0.00, Dabur has 0.03,
Godrej has 0.01, Colgate has 0.00, Marico has 0.03, Emami has 0.08, and
P&G has 0. Hence, it is concluded that the highest mean value indicates the
Emami. The CV analysis shows that the HUL and P&G have the lowest CV,
which has a consistent performance compared to others.
 The firm size of the selected FMCG companies shows a fluctuating trend. The
mean value of HUL has 4.29, Nestle has 3.87, ITC has 4.78, Dabur has 3.73,
Godrej has 3.79, Colgate has 3.37, Marico has 3.60, Emami has 3.36, and
P&G has 3.02. Hence, it is concluded that the highest mean value indicates the
ITC. The CV analysis shows that Nestle has the lowest CV, which has a
consistent performance.
 The cash to total asset ratio has an ideal value is 1:1, indicating the selected
companies show a fluctuating trend. However, the mean value of the cash to
total asset ratio for HUL is 0.17, and Nestle has 0.16. ITC has 0.09, Dabur has
0.04, Godrej has 0.03, Colgate has 0.17, Marico has 0.05, Emami has 0.06 and
P&G has 0.44. The result shows that the selected FMCG companies have a
mean value of higher than one, which indicates that they can pay off their
short-term obligations with their most liquid asset. The CV analysis result
indicates that Colgate has more stable than others.
 The operating cash flow of the selected FMCG companies shows a fluctuating
trend. The mean value of HUL has 5705.25, and Nestle has 1588.91, ITC has
11180.32, Dabur has 1074.66, Godrej has 1011.81, Colgate has 769.92,
Marico has 790.72, Emami has 608.54 and P&G has 85.23. Hence, it is
concluded that the highest mean value indicates the ITC. The CV analysis
shows that the ITC has the lowest CV, which has a consistent performance
compared to others.

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 The investing cash flow of the selected FMCG companies shows a fluctuating
trend. The mean value of HUL has -189.14, and Nestle has -88.48, ITC has -
3163.58, Dabur has -442.08, Godrej has -359.11, Colgate has -157.25, Marico
has -56.82, Emami has -350.32 and P&G has 173.07. Hence, it is concluded
that the highest mean value indicates the P&G. The CV analysis shows that
the HUL has the lowest CV, which has a consistent performance compared to
others.
 The financing cash flow of the selected FMCG companies shows a fluctuating
trend. The mean value of HUL has -5398.78, and Nestle has -1282.11, ITC has
-8008.99, Dabur has -650.82, Godrej has -650.84, Colgate has -591.87, Marico
has -734.82, Emami has -297.05 and P&G has -192.71. Thus, it is found that
the highest mean value indicates the P&G. The CV analysis shows that the
HUL has the lowest CV, which has a consistent performance compared to
others.
 Leverage is negatively correlated with FP (r-value = -0.477; p>5%), size is
positively associated with FP (r-value = 0.721; p>5%), whereas operating cash
flow positively associated with FP (r-value = 0.549; p>5%), investing cash
flow positively associated with FP (r-value = 0.291; p>5%), and financing
cash flow negatively correlated with FP (r-value = -0.606; p>5%) and it is not
statistically significant. Also, the correlation value of the cash to asset ratio is
0.876 (p<5%), and the significance value is less than 5%, which is statistically
significant. As a result, all the cash management practices are not associated
with the FP, but the cash to asset ratio is positively associated.
 The correlation reveals that cash management is negatively associated with
financial performance and is not statistically significant. However, the r-value
is -0.255, whereas the significance value is greater than 5%, which is not
statistically significant to financial performance.
 It shows that the r-value of cash management and financial performance is
0.255. These R-values reveal the relationship between cash management and
financial performance is low. After evaluating the relationship, R2 shows the
variation of cash management on financial performance. At present, cash
management has a 6.5% variation in financial performance. The F-value of the
variable is 0.349, and the significance value is 0.581, which shows that the

66
 value is greater than 5%. Thus, the result shows that the present value is
sufficient to predict financial performance. The beta value is -0.255, the t-
value is -0.590, and the significance value is 0.581 (p>5%). Hence, it is
concluded that the cash management does not affect the financial
performance, and it is not statistically significant

5.2. SUGGESTIONS

 The study suggested that FMCG companies increase their capital structure
debt to improve financial performance.
 A strong governance structure is required for the FMCG industry.
 Firms should be encouraged to implement effective cash flow management
systems. Companies should undertake a cash flow analysis before deciding on
their success in India. This will help them make sound investment judgments.
 Financing cash flows should be removed while estimating earnings per share.
 FMCG companies should keep their cash balances healthy with reliable CA
and CL.
 Because idle cash increases opportunity costs and affects revenues, FMCG
companies should maintain cash balances low and invest spare cash in
enticing daily operational possibilities.
 The cash flow should be managed to invest additional funds in profitable
enterprises.
 FMCG companies do not maintain adequate cash levels. The cash amount is
abnormally large or excessively low for no clear reason. Based on sales, profit,
and other variables, cash management should be recommended.

5.3. CONCLUSIONS

Cash management is critical to the successful implementation of a financial

organization. A financial manager’s principal role is to maximize cash management in
businesses. A variety of additional financial factors contribute to a company’s overall
financial performance. However, the deteriorating financial position suggests
insufficient and inefficient cash management methods due to a lack of additional cash
in successful businesses and a lack of employee understanding of better cash
management strategies within FMCG organizations. The study aimed to determine

67
how cash management influences the financial performance of FMCG. The
correlation outcome shows that FMCG companies of cash management negatively
correlated with the financial performance. The regression analysis demonstrates that
cash management has a 6.5% effect on financial performance, which is not
statistically significant.

Thus, FMCG company management must maintain great cash management control to
ensure optimal cash flow during low and high cash seasons. Inadequate cash
management leads to low profitability. This study showed that cash management
abilities are critical to a company’s success. According to management, this decision
aided in establishing the company’s financial situation. Management has thoroughly
examined the funds to determine how they would be used to increase revenue and
value. Businesses that understand and value-successful cash management will thrive.
According to this study, a company’s cash balance valuation, short-term financial
asset selection, management strategy, and idle fund investments are critical
components of an efficient money management system. This study also emphasizes
the need for a sound financial management system. Implementing an effective cash
management system decreases financial risk, strengthens the balance sheet, enhances
company confidence, and improves operational efficiency. The study also shows that
cash management is a strategy-driven activity for organizations that rely on managers
rather than attributes.

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