EXECUTIVE SUMMARY

Without the fund, organizational strength is not possible. Financial management in every
business is very important in the present commercial environment. Active and proficient
fund management covers optimum utilization of funds in such a manner that generates
maximum revenues for the business. It is a qualitative and prudent function of finance
professionals to make decisions regarding how, when, for what, and how much fund is to
be utilized. But today, technology has changed the way businesses operate, a result of
which the goals of financial management and the functions of finance professional has
undergone massive changes. Through this project, we try the understand the actual goals
of financial management amongst all the goals in this changing environment also with the
development of technology we see how the role of a finance professional has evolved and
what new roles have emerged for them and in the end, we try to analyze and understand
some key financial data of Nestlé India.
This project gave me a great learning experience at the same it helped increase my
understanding of financial management changes it has undergone over the years, it also
allowed me to implement my analytical ability. I hope the conclusions made in the project
are of use.
 GOAL OF FINANCIAL
MANAGEMENT

Traditionally the primary goal of financial management was optimal procurement and usage
of funds but with various developments and changes in the way the business operates the
goal of financial management has also changed, the modern approach to financial
management provides a conceptual and analytical framework for the financial decision
making according to it the finance function covers both aquation of funds as well as there
allocations. But no matter how much the goals of financial management change one of its
fundamental goals which is also very critical to any business no matter how much it changes
is Wealth Maximisation. This goal remains the same even in the dynamic business
environment
 WEALTH MAXIMISATION
Wealth Maximization Objective is also known as “Value Maximization” or “Net Present Worth
Maximization.” This objective is considered appropriate for decision-making. Wealth means
the wealth of shareholders. The wealth of shareholders is determined by the market value of
shares.
Wealth also signifies Net Present Value(NPV) which is the difference between the present value
of cash inflows and the present value of cash outflows. In this way, the wealth maximization
objective considers the time value of money and assign different values to cash inflows
occurring at different point of time. So, according to the wealth maximization objective,
investments should be made in such a way that it maximizes Net Present Value.
 ADVANTAGES OF WEALTH
MAXIMISATION
 A firm that maximizes its profits also ensures its long-term survival.
 Wealth maximization is better for society. The financial institutions, workers, and
shareholders all have a stake in the business.
 Wealth maximization considers the time value of money. By using cash flows, businesses can
pay higher wages to owners and invest in research & development. That way, a business can
survive a downturn in the economy.
 It focuses on cash flows, which are more precise and definite, and this means that there is
less room for ambiguity with accounting profits.
 It is operationally logical and feasible.
 While profit maximization is still a valid business strategy, wealth maximization is a much
more versatile goal that helps businesses maximize their share in the market and maintain
the satisfaction of consumers.
 It offers rational guidelines aiding in the effective usage of the resources available.
 Why does business not pursue profit
instead of wealth maximization?
One reason is that profit maximization does not take the concepts of risk and reward into
account as shareholder maximization does. The goal of profit maximization is, at best, an
interim goal of financial management. Therefore we understand that although
maximization of profit is important for any business but wealth maximization plays a
crucial role not only because of its analytical framework but also because it is also a
fundamental key to one of the traditional goals of financial management procurement of
funds and their further allocations.
Thus, we can conclude that wealth management Is an amalgamation of traditional and
modern goals of financial management and is the most important goal of financial
management
 EMERGING ROLE OF A FINANCE
PROFESSIONAL
Traditionally the role of a finance professional was restricted to raising and allocating of funds
and profit planning but now money and possessions are evolving in the digital and virtual
world, and the role of a finance professional is also changing to keep up. New roles have
emerged for them with the rapid development of technology and its infusion with the finance
function popularly known as “fintech”. Some of these roles are:-

• Financial operations- in today’s world there is not only a need for finance professionals as
an accountant but also financial operations specialists to help run the financial service
industry smoothly like credit services, mutual funds, etc
• Investment banking- as discussed in the previous slides wealth maximization is an
important function of financial management and a huge part of that function is played by an
investment banker who facilitates these functions by raising money through stocks and
bonds
• Chief fintech officer- with the increase of technology infusion in the finance functions the
future is going to demand a chief fintech officer with knowledge of finance and technology.
• Portfolio manager- the mutual fund industry is growing rapidly and with this growth, the
need for a portfolio manager who manages the funds of an individual is also increasing
STUDY ON NESTLE INDIA
 COMPANY PROFILE
NESTLÉ India is a subsidiary of NESTLÉ S.A. of Switzerland. With eight factories and a
large number of co-packers, Nestlé India is a vibrant Company that provides consumers
in India with products of global standards and is committed to long-term sustainable
growth and shareholder satisfaction.
The Company insists on honesty, integrity, and fairness in all aspects of its business
and expects the same in its relationships. This has earned it the trust and respect of
every stratum of society that it comes in contact with and is acknowledged amongst
India's 'Most Respected Companies' and amongst the 'Top Wealth Creators of India'.
 ANALYSIS OF KEY FINANCIAL DATA
Now we embark upon analyzing some key financial data of Nestle India to
understand the financial health of the company over the years. For this
purpose, we take the help of ratio analysis. Ratio analysis is a widely used
tool of financial analysis. It can be used to compare the risk and return
relationships of firms of different sizes. It is defined as the systematic use of
ratios to interpret the financial statements so that the strengths and
weaknesses of a firm as well as its historical performance and current
financial condition can be determined. The term ratio refers to the numerical
or quantitative relationship between two items and variables. These ratios are
expressed as (I) percentages, (II) fractions, and (III) proportions of numbers.
 CURRENT RATIO
The current ratio is the ratio of total current assets to total current liabilities. It is
calculated by dividing current assets by current liabilities. Generally, the current ratio
of 2:1 is considered satisfactory or ideal.
Current ratio = Current Asset/Current Liabilities

CURRENT ASSETS CURRENT LIABILITIES

YEAR RATIO
(Rs in Cr) (Rs in Cr)

2019 3817.17 2147.51 1.77

2020 4185.08 2492.55 1.67
2021 2738.76 2603.24 1.05

As a conventional rule, a current ratio of 2:1 is considered as satisfactory. This

The ideal ratio means that the assets shall be at least twice the current liability.
In the past two years, the company is not able to attain the ideal ratio
 QUICK RATIO
It is the ratio of quick assets to current liabilities. It is the measure of instant
The debt-paying ability of the business enterprise. It is also known as the acid test ratio,
An ideal ratio is 1:1.
Quick Ratio = Quick Assets/ Current Liability,
where, Quick Assets = Current Assets – Inventory – Prepaid Expenses
QUICK ASSETS CURRENT LIABILITIES
YEAR RATIO
(Rs in Cr) (Rs in Cr)
2019 1308.05 2147.51 0.60
2020 1769.87 2492.55 0.71
2021 11,584.8 26,032.4 0.44

Generally, a quick ratio of 1:1 is considered satisfactory. This means that

quick assets are just equal to the current liabilities. For this company the past
3 years show a less than liquid ratio when compared to the satisfactory ratio.
It further means that the company is not able to pay off its current liabilities.
 DEBT EQUITY RATIO
It expresses the relationship between long-term debt and equity. Long-term debt means
funds invested by outsiders. It includes debenture, mortgages, and all long-term loans.
Debt Equity Ratio = Long-term Debt/Shareholders Fund

SHAREHOLDERS
LONG-TERM DEBT
YEAR FUNDS RATIO
( Rs in Cr)
(Rs in Cr)
2019 2978.43 1932.26 1.54
2020 3387.84 2019.34 1.67
2021 3522.21 2084.48 1.68

A low debt-equity ratio reflects more security. Here, we see that for the last three
years the ratio is more than 1 which indicates that most of the assets are funded
through Debt rather than equity which might decrease lenders’ confidence.
 NET PROFIT RATIO
It is also known as net margin. This measures the relationship between net profits and
sales of a firm. A high net profit margin would ensure an adequate return to the owners
as well as enable a firm to withstand adverse economic conditions when the selling
price is declining, the cost of production is rising and demand for the product is falling.
A low net margin on the other hand has the opposite implications.
Net profit margin = Profit After Tax/Revenue From Operations*100

REVENUE FROM
PROFIT AFTER
YEAR OPERATION(Rs in RATIO
TAX( Rs in Cr)
Cr)
2019 1969.55 12615.78 15.61
2020 2082.43 13495.88 15.43
2021 2144.86 14709.41 14.58

The net profit ratio shows how effective cost control strategies are implemented by the
management. And we observe that there is an increase in the net profit ratio for the
first 2 years and then a slight decrease in 2021 which indicates that although the
company is efficient in converting its sales into profit it should revisit its control
strategies to avoid further decline.
 WORKING CAPITAL TURNOVER RATIO
This ratio, should the number of times the working capital results in sales. In
other words, this ratio indicates the efficiency or otherwise in the utilization of
short term funds in making sales. Working capital means the excess of current
over the current liabilities.
Working Capital turnover ratio = Revenue From Operation/Net Working
Capital
REVENUE FROM NET WORKING
YEAR OPERATIONS(Rs CAPITAL(Rs in RATIO
in Cr) Cr)
2019 12615.78 1669.66 7.55
2020 13495.88 1692.53 7.97
2021 14709.41 135.52 108.5
Working capital turnover ratio shows how efficiently a firm uses its working
capital. Always a high working capital ratio is preferred by every company.
 REFERANCE
 https://www.nestle.com/investors/annual-report
 https://www.investopedia.com/
 https://en.wikipedia.org/wiki/Nestl%C3%A9_India
 https://ncert.nic.in/textbook/pdf/leac205.pdf
 All the data presented have been converted in crores from millions
 Nestle India maintains records from 1st January to 31st December i.e
calendar year therefore the same has been taken into account.
THANK YOU