A PROJECT REPORT

ON

“COMPARATIVE RATIO ANALYSIS OF

PROFITABILITY RATIO’S OF BRITANNIA AND
CADBURY INDIA LTD.”

Submitted in partial fulfillment of the requirements for

Master of Business Administration (MBA)
Batch 2015-2017

Submitted to: Submitted by:

PANKAJ KUMAR
Roll no:-1543848

GIAN JYOTI INSTITUTE OF MANAGEMENT & TECHNOLOGY,

PHASE-II MOHALI
ACKNOWLEDGEMENT

1
I PANKAJ KUMAR, MBA Student in GIAN JYOTI INSTITUTE OF
MANAGEMENT & TECHNOLOGY, PHASE-II MOHALI, is highly grateful
to all those who guided me in completing this project.

It is great pleasure for me to acknowledge the kind of help and guidance received
to me during my project work. I was fortunate enough to get support from a large
number of people to whom I shall always remain grateful.

I would like to express my sincere gratitude to Prof. for giving me this

opportunity to undergo this lucrative project for her great guidance and advice on
this project, without which I will not be able to complete this project.

I am very thankful to Prof. for giving me valuable suggestion and

encouragement to bring out a good project.

INDEX

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CHAPTER PARTICULARS PAGE NO.
NO.
1 INTRODUCTION 04

2 OBJECTIVE OF THE STUDY 05

3 COMPANY PROFILE 06

4 RESEARCH METHODOLOGY 08

5 UNDERSTANDING THEROTICAL 10
FRAMEWORK
6 DATA ANALYSIS & INTERPRETATION 15

7 OBSERVATION AND FINDINGS 19

8 SUGGESTION & CONCLUSIONS 20

9 LIMITATIONS 21

10 BIBLIOGRAGHY 22

INTRODUCTION

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 This project report covers all the aspects relating to the PROFITABILITY
ratios of BRITANNIA and CADBURY INDIA LTD interpreted according to standards.
This project was done with the help of secondary data as research in finance
subjects is done on performance and not potential.

The project selected by me is to do comparative PROFITABILITY ratio analysis for

the above mentioned two companies using various financial statements. The
main intention was to group or regroup the various figures and information
appearing on the financial statement (either profitability statement or balance
sheet or both) to draw the fruitful conclusions there from.
I found that by comparing PROFITABILITY ratios of both the companies unveils
why one company is more efficient in its activity as compared to the other.

PROFITABILITY ratios are valuable as they depict how are you utilizing and
managing your resources.

All and all it was a good experience doing this project and will be of great help to
me in future.

OBJECTIVES OF THE STUDY

4
  To identify the comparative financial strengths and weakness of Britannia industries and
Cadbury india Ltd.

 Through the net profit ratio and other profitability ratio, understand the profitability
position of the company.

 To know the liquidity position of the company, with the help of Current ratio.

To find out the utility of financial ratio in credit analysis and determining the financial capability
of the firm.

COMPANY PROFILE

5
BRITANNIA

Britannia was incorporated in 1918 as Britannia Biscuits Co LTD in Calcutta. In

1924, Pea Frean UK acquired a controlling stake, which later passed on to the
Associated Biscuits International (ABI) an UK based company. During the 50’s and
60’s, Britannia expanded operations to Mumbai, Delhi and Chennai. In 1989, J M
Pillai, a Singapore based NRI businessman along with the Group Danone acquired
Asian operations of Nabisco, thus acquiring controlling stake in Britannia. Later,
Group Danone and Nusli Wadia took over Pillai’s holdings.

Britannia Industries Limited (Britannia) is one of the largest biscuit

manufacturing companies in India. The company is engaged in the manufacture of
biscuits, rusks, cookies and cakes. Britannia operates in a single segment, foods
including bakery products such as biscuits, bread, cakes, rusk, and dairy products.
The company is headquarted in Kolkata, India and employs 2,358 people

Global Markets Direct, the leading business information provider, presents an in-
depth business, strategic and financial analysis of Britannia Industries Ltd. The
report provides a comprehensive insight into the company, including business
structure and operations, executive biographies and key competitors. The
hallmark of the report is the detailed strategic analysis and Global Markets
Direct’s views on the company.

Britannia's plants are located in the 4 major metro cities – Kolkata, Mumbai,
Delhi, and Chennai. A large part of products arealso outsourced from third party
producers. Dairy products are outsourced from three producers - Dynamic Dairy
based in Baramati, Maharashtra, and Modern Dairy at Karnal in Haryana and
Thacker Dairy Products at Howrah in West Bengal.

CADBURY INDIA LTD.

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 Cadbury India is a fully owned subsidy of Kraft Foods Inc. The combination
of Kraft Foods and Cadbury creates a global powerhouse in snacks, confectionery
and quick meals. 

With annual revenues of approximately $50 billion, the combined company is the
world's second largest food company, making delicious products for billions of
consumers in more than 160 countries. We employ approximately 140,000
people and have operations in more than 70 countries. 

In India, Cadbury began its operations in 1948 by importing chocolates.

After 60 years of existence, it today has five company-owned manufacturing
facilities at Thane, Induri (Pune) and Malanpur (Gwalior), Bangalore and Baddi
(Himachal Pradesh) and 4 sales offices (New Delhi, Mumbai, Kolkota and
Chennai). The corporate office is in Mumbai.

Currently, Cadbury India operates in four categories viz. Chocolate

Confectionery, Milk Food Drinks, Candy and Gum category. In the Chocolate
Confectionery business, Cadbury has maintained its undisputed leadership over
the years. Some of the key brands in India are Cadbury Dairy Milk, 5 Star, Perk,
Éclairs and Celebrations. 

Cadbury enjoys a value market share of over 70% - the highest Cadbury brand
share in the world! Our billion-dollar brand Cadbury Dairy Milk is considered the
"gold standard" for chocolates in India. The pure taste of CDM defines the
chocolate taste for the Indian consumer.

Today, as a combined company with an unmatched portfolio in confectionery,

snacking and quick meals, we are poised in our leap towards quantum growth.
We are the world's No.1 Confectionery Company. And we will continue to “make
today deli

RESEARCH METHODOLOGY

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 Research Methodology is a way to systematically solve the problems. It may
be understood to study how research is done scientifically. In this, we study
various steps that are generally adopted by the researcher in studying research
problems along with the logic behind them, to understand why we are using
particular method or technique so that the research results are capable of being
evaluated. During my project work, I have used a lot of data to understand
concept of Ratio Analysis. The data collected was interpreted and then used as
information in project.

DEFINITON

1) Redman and Mory:-

“Systematized effort to gain new knowledge”

2) D. sliesinger and M.stephonson:-

“The manipulation of things, concept or symbol for the purpose of generalizing

to the extend, correct or verify knowledge, whether that knowledge aids in
construction of theory or in practice of an art.”

3) The Advanced Learner’s Dictionary of Current English:-

“A careful investigation or inquiry especially through search for new facts in any
branch of knowledge

SOURCES OF DATA COLLECTION

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 Data for this project is collected through Secondary sources. Secondary data
is collected with the help of following :–

1. Annual report
Majority of information gathered from data exhibited in the annual reports
of the company. These includes annual reports of the year 2005-06,2006-
07,2007-08,2008-09 and 2009-10.

2. Reference Books
Theory relating to the subject matter and various concepts taken from
various financial reference books.

UNDERSTANDING THEORETICAL BACKGROUND

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RATIO ANALYSIS:

INTRODUCTION:-

Ratio analysis is an important technique, which is widely used for

interpreting financial statement. The technique serves as a tool for assessing the
current and long-term financial soundness of a business. It is also used to analysis
various aspects of operating efficiency and level of profitability. A German scholar
used ratios for the first time in 1919.

DEFINITION:-

1) Wixon, Kell and Bedford, “Ratio is an expression of quantitative

relationship between figures drawn from financial statements”.
2) Hunt, Willant Donaldosa, “Ratios are simply a means of highlighting in
arithmetical terms, of relationship between figures drawn from
financial statements.”

Conclusion: - Financial ratios are useful because they summarize briefly the
result of detailed and computation.

IMPORTANCE OF RATIO ANALYSIS

Ratios are useful for the following reasons:-

1) Helpful in Forecasting: - The ratio can be used by financial managers for

future financial planning. Ratio calculated for a number of years work as a
guide for the future.

2) Useful in Co-ordination: - Ratios are useful in co-ordination, which is very

much needed in business. The efficiency and weakness of an enterprise if

10
 communicated properly, will establish a better co-ordination among areas
of appreciation and control.

3) Helpful in Control: - The most important aspect of ratio analysis is that is

very useful in controlling the areas of inefficiencies or weakness. It can be
use by the management as a technique of correction.

4) Helpful in Communication: - Ratios are used for communication weak and

good point to the concerned parties.

5) Helpful in Efficiency Appraisal: - Ratios are the scale of comparison; here

the variations in financial statement, if they need appreciation, are brought
to limelight.

6) Helpful in Evaluation of Financial Position: - The ratio analysis is useful for

financial diagnosis of an enterprise. The under mentioned ratios will make
the above clear:
Current Ratio: - It speaks about the working capital the company is having
and the funds to pay-off its short-term commitments.

Solvency Ratio: - Profitability Ratio, Capital Gearing Ratio are all such ratio
that can evaluate the financial soundless or weakness of a company.

7) Helpful to Investors, Financial Institutions and Employees: - The ratios are

economic barometer useful to all mentioned above as they can know the
good and bad position of a company by making a comparative study of
financial statement.

VARIOUS TYPE OF FINANCIAL STATEMENTS:-

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Classification of ratio is made based on requirement by end users and they
indicate symptoms as characteristic of the company.

PROFITABILITY RATIO:-

Measures that indicate how well a firm is performing interms of its ability to

generate profit. Formulae of some of the common ratios are as follows: (1) Book
Value Per share: Total common (ordinary) equity ÷ Number of common
(ordinary) shares issued and outstanding. (2)Dividends Per Share:
Dividends paid ÷ Number of common (ordinary) shares issued and outstanding.
(3) Earnings Per Share: (Net income - preferred stock or preference shareinterest)
÷ Number of common (ordinary) shares issued and outstanding. (4) Gross
profit percentage: Total cost ofsales in a period x 100 ÷ Total sales revenue for
that period. (5) Net income percentage: Net income for a period x 100 ÷ Total
sales revenue for that period. (6) Operating profit percentage: Earnings before
interest and taxes (EBIT) in a period x 100 ÷ Total sales revenue in
the sameperiod. (7) Return On Common equity: (Net income for a period -
Dividends) ÷ (Common equity - Preferred stock). (8) Return On Investment: Net
income ÷ Total assets.

1] GROSS PROFIT RATIO:-

GROSS PROFIT RATIO = GROSS PROFIT X 100

SALES

In 2008-09,the Gross Profit Ratio was 7.85 and it went to 6.12 next year.As
there is no standard Ratio,company has to determine its standard ratio
based on past GP ratios or GP ratios of other concern.The Ratio if we
compare it shows that-

1)Failure in managing purchases,production,sales and inventory

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 2)Loose control over direct costs of labour,fuel,freights etc.

3)Lower productivity and lower margin to meet other expenses

2] OPERATING RATIO:-

OPERATING RATIO = COGS + OPERATING EXPENSES X

100

SALES

In 2008-09,the Operating Ratio was 8.97 and it went to 7.2 next year.It indicates
the cost of Expenses.As there is no standard Ratio,company has to determine its
standard ratio based on past GP ratios or GP ratios of other concern.The Ratio if
we compare it shows that-

1) High efficiency in managing the Operations of the concern like purchases

made at lower prices,optimum level of production,good inventory
management and good control of direct cost of labour,fuel,freight etc.
2) 2) A very good Margin available to meet non-operating Expenses.

3] NET PROFIT RATIO:-

NET PROFIT RATIO = NPAT X

100

SALES

In 2008-09,the Net profit Ratio was 7.31 and it went to 5.75 next year.It
indicates the relationship between net profit and sales.As there is no standard
Ratio,company has to determine its standard ratio based on past NP ratios or NP
ratios of other concern.The Ratio if we compare it shows that-

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 1) Inefficiency in managing its activities like trading.production,financing and
investment.
2) unsatisfactory control over operating as well as non operating costs
3) unusual losses like loss by fire,flood etc.
4) Low increase in the net worth or the proprietors funds.
5) Weak capacity of the concern to face bad economic situation.

4] EXPENSES RATIO:-

EXPENSES RATIO = EXPENSES X 100

NET SALES

Expense ratios indicate the relationship of various expenses to net

sales. The operating ratio reveals the average total variations in expenses. But
some of the expenses may be increasing while some may be falling. Hence,
expense ratios are calculated by dividing each item of expenses or group of
expense with the net sales to analyze the cause of variation of the operating ratio.

The ratio can be calculated for individual items of expense or a group of items of a
particular type of expense like cost of sales ratio, administrative expense ratio,
selling expense ratio, materials consumed ratio, etc. The lower the operating
ratio, the larger is the profitability and higher the operating ratio, lower is the
profitability.

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 DATA INTERPRETATION

COMPARATIVE ANALYSIS OF BRITANNIA INDUSTRIES LTD AND

CADBURY

PROFITABILITY RATIOS:-

1] GROSS PROFIT RATIO:-

GROSS PROFIT RATIO = GROSS PROFIT X 100

SALES

14
12
10
8
BRITANNIA
6 CADBURY
4
2
0
2010 2009 2008 2007 2006

Norm: - Higher the ratio shows higher efficiency and vice versa.

Particulars 2010 2009 2008 2007 2006

BRITANNIA 4.89 6.12 7.85 4,7 10.46
CADBURY 11.54 6.12 7.85 4.7 10.46
INTERPRETATION:-

The above table shows that the In Britannia Gross profit ratio is decreasing
year by year from 2006 to 2010. This is due to increase in cost of sales and in
Cadbury india Ltd, gross profit is increasing as compared to previous years.

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2] OPERATING RATIO:-

OPERATING RATIO = COGS + OPERATING EXPENSES X

100

SALES

16
14
12
10
8 BRITANNIA
6 CADBURY
4
2
0
2010 2009 2008 2007 2006

Norm: - Higher the ratio shows higher efficiency and vice versa.

Particulars 2010 2009 2008 2007 2006

BRITANNIA 5.99 7.20 8.97 5.85 11.72
CADBURY 13.81 13.75 13.27 13.16 11.25

INTERPRETATION:-

The above table shows that in Britannia, Operating ratio is decreasing year
by year from 2006 to 2010 and in Cadbury india Ltd there is no major change in
operating ratios from 2006 to 2010.As we compare we come to know that
Cadbury is performing well than Britannia.

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 3] NET PROFIT RATIO :-

NET PROFIT RATIO = NPAT X

100

SALES

12

10

6 BRITANNIA
CADBURY
4

0
2010 2009 2008 2007 2006

Norm: - Higher the ratio shows higher efficiency and vice versa.

Particulars 2010 2009 2008 2007 2006

BRITANNIA 3.38 5.75 7.31 4.86 8.48
CADBURY 9.68 10.27 8.94 6.42 5.11

OBSERVATIONS/ INTERPRETATION:-

The above table shows that in Britannia ,the net profit is decreasing year by
year like it in 2006, it was 8.48 and it went up to 3.38 in 2010.whereas in Cadbury
net profit is increasing year by year.

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4] RETURN ON NETWORTH:-

RETURN ON NETWORTH = NPAT X 100

SHAREHOLDERS FUND

60

50

40

30 BRITANNIA
CADBURY
20

10

0
2010 2009 2008 2007 2006

Norm: - Higher the ratio shows higher efficiency and vice versa.

Particulars 2009 2008 2007 2006

BRITANNIA 48.27 18.40 24.06 16.87 24.99
CADBURY 35.53 35.69 27.77 19.42 11.30

OBSERVATIONS/ INTERPRETATION:-

The above ratio indicates that in Britannia, the net profit available to equity
shareholder is rising from 2006 to 2010 whereas in Cadbury also return on
networth is rising from 11.30 in 2006 to 35.53 in 2010.

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 OBSERVATION AND FINDINGS

 In this project I calculate some ratios; these ratios are very useful to
interpret financial position of the company. From that it is clear that the
Britannia and Cadbury india Ltd are in advanced stage. From the ratios
calculated above following conclusions can be drawn.

 The gross profit earned by the both the companies are declining every
year. From 2006 to 2010, it is fluctuating a lot which is due to failure in
managing purchases, production, sales and inventory or loses control over
direct costs of labor, fuel, freights etc.

 Operating ratio of Britannia going down from 2006 to 2010 which is

nothing but due to certain reasons like low efficiency in managing the
operations of the company or low margin available to meet non-operating
expenses whereas as compared to Cadbury the fluctuations are not much.

 The net profit is nothing but profit earned by the company after deducting
interest and taxes. The graph is showing that in Britannia from 2006 to
2010,the net profit is declining which is due to inefficiency in managing its
activities like trading, production, financing and investment or
unsatisfactory control over operating or non operating costs whereas in
Cadbury its rising from year year.

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 SUGGESTIONS AND CONCLUSION:-

 The in-depth analysis of key financial ratios in this project helps in

measuring the financial strength, liquidity conditions and operating
efficiency of the company. It also provides valuable interpretation
separately for each ratio that helps organization implementing the
findings that would help the organization to increase its efficiency.
 Ratios are only post mortem analysis of what has happened between
two balance sheet dates. For one thing the position of the company
in the interim period not revealed by analysis, moreover they give no
clue about the future. Ratio analysis in view of its several limitations
should be considered only as a tool for analysis rather than as an end
itself.
 From the analysis it is evident that the gross profit ratio is good,
whereas the operating ratio is around optimum level to the industry
standards. As a whole the liquidity position of the company is good.

 The company not very well used its fixed assets efficiently company
has reduce it in order to invest the major portion in working capital
or investment in current assets. This is one of the reason for profit
fluctuation.
 Thus finally the company must try to improve its profit margins as
they are below industry levels. This improvement may also bring up
its return on investment and overall efficiency to the company.
 The business environment of both the company is reasonably good.
The company’s track record is always oriented towards profitable
growth and with strong fundamentals

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 LIMITATIONS

Though the every researcher tries his/her best to fulfill the objectives of his,
her study, but still there are some limitation.

 The authority and genuinely of the data received cannot be tested as

every company does not disclose al l of its records on internet or
discloses bon the financial statement.
 False result
Accounting ratio is based on data drawn from accounting records. In
this case if data is correct, then only the ratio will be correct. The data
therefore must be absolutely correct.
 Effect of price level changes
Price level changes often make the comparison of figures difficult over a
period of time.
Changes in price affect the cost of production, sales and also the value of
the assets.
 The comparison is rendered difficult because of differences in situations
of one company as compared to the other.
 Ratios are tool of quantitative analysis only. Normally qualitative factors
are needed to draw conclusions.
 Ratio Analysis is only the beginning as it gives only a little information
for the purpose of decision making.

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 BIBLIOGRAPHY

Following books were referred for carrying out the project: -

1. Financial Management by N.M. Venchalekar.

2. Financial Management by KHAN AND JAIN.

3. Annual Reports of Britannia and Cadbury India Ltd.

4. Financial Management by Ainapure Ainapure

Following websites were referred: -

1. www.money.rediff.com
2. www.cadburyindia.com
3. www.wikipedia.com
4. www.cadbury.com

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