PROFITABILITY ANALYSIS OF

DABUR NEPAL PVT.LTD

A Project Work Report

By

Bibek Khanal

T.U.Regd No: 7-2-0926-0019-2015

Texas International College

Submitted to

The Faculty of Management

Tribhuvan University

Kathmandu

In Partial fulfilment of the Requirements for the Degree Of

BACHELOR OF BUSINESS STUDIES (BBS)

Kathmandu, Nepal

April, 2019

1
 DECLARATION

I hereby declare that the project work entitled “PROFITABILITY ANALYSIS OF DABUR
NEPAL PVT LTD” submitted to the Faculty of Management, Tribhuvan University,
Kathmandu is my original work done in the form of partial fulfilment of the requirement for
the degree of Bachelor of Business Studies(BBS) under the supervision of MR. Youbaraj
Sapkota, faculty member, Texas International College, Mitrapark, Kathmandu. This project
work report has not been submitted to any other institution or university for the reward of any
degree or diploma.

Signature:

Bibek Khanal

Date: 14/01/2076

2
 SUPERVISOR’S RECOMMENDATION (no print college will
provide)

The project work report entitled “PROFITABILITY ANALYSIS OF DABUR NEPAL PVT
LTD” submitted by BIBEK KHANAL of TEXAS INTERNATIONAL COLLEGE,
MITRAPARK, KATHMANDU is prepared under my supervision as per the procedure and
format requirements laid by the Faculty of Management, Tribhuvan University, Kathmandu,
as partial fulfilment of the requirement for the award of the degree of Bachelor of Business
Studies (BBS). I, therefore, recommend the project work report for evaluation.

Signature:

MR.Youbaraj Sapkota

TEXAS INTERNATIONAL COLLEGE

Date: 2075/01/21

3
 ENDORSEMENT (College Property)

We hereby endorse the project work entitled “PROFITABILITY ANALYSIS OF DABUR

NEPAL PVT LTD” submitted by BIBEK KHANAL of TEXAS INTERNATIONAL
COLLEGE, MITRAPARK, KATHMANDU, in partial fulfilment of the requirements for the
award of the degree of Bachelor of Business Studies (BBS) for external evaluation.

Signature: Signature: Signature:

Youbaraj Sapkota Bhupendra Pandey Shyam Sundar Shrestha

Supervisor Management Research Principal

Committee Texas Int’l College

Date: Date: Date:

4
 ACKNOWLEDGEMENT
Let me begin my acknowledgement by thanking a number of people and faculty for providing
suggestion and guidance throughout the preparation of my project work. So, I am thankful to
them for their continued support and advice. First of all, I am very much grateful to the
Tribhuvan University authorities to include this project work program in the syllabus of BBS
4th year, which, I think is very much helpful in the development of practical knowledge of the
students. I take this opportunity to express my profound gratitude and my deep regard to my
lecturer Mr. Youbaraj Sapkota for this thesis and also respected teacher Mr. Shyam Sundar
Shrestha for providing instruction to this assignment. I am obliged to staff members of Dabur
Nepal for the valuable information provided by them in their respective fields. I am grateful
for their cooperation during my assignment. Moreover, number of friends had always been
around to support me through hardships that occurred in the process. I would like to thank all
those helping hands that assisted me directly and indirectly for preparing report.

Thank You!

5
Table of Contents
Title page……………………………………………………………………………………...........i.

Declaration…………………………………………………………………….……...................ii.

Supervisor`s recommendation………………………………………………..........................iii

Endorsement…………………………………………………………………………..................iv

Acknowledgement………………………………………………………………….....................v

List of Figures ......................................................................................................................................... 7

CHAPTER-I .......................................................................................................................................... 9
INTRODUCTION................................................................................................................................. 9
1.1 Background study of Profitability Analysis............................................................................ 9
1.1.1 Meaning of Company...................................................................................................... 10
1.1.2 Origin and evolution of Companies ............................................................................... 10
1.1.3 History of companies in Nepal ....................................................................................... 11
1.1.4 Introduction to Dabur Nepal Pvt. Ltd........................................................................... 12
1.2 Statement of Problem ............................................................................................................. 14
1.3 Objective of the study ............................................................................................................. 15
1.4 Rationale of the study ............................................................................................................. 15
1.5 Review ...................................................................................................................................... 15
1.5.1 Conceptual Review................................................................................................................. 15
1.5.1.1 Importance of profitability Analysis ................................................................................. 16
1.5.1.2 Profitability Ratios .............................................................................................................. 16
1.6 Research Methodology ........................................................................................................... 22
1.6.1 Research design:..................................................................................................................... 22
1.6.2 Sources of data ....................................................................................................................... 23
1.6.3Data collection techniques ...................................................................................................... 23
1.7 Limitations of the study ................................................................................................................ 24
CHAPTER-II....................................................................................................................................... 25
RESULTS AND FINDINGS .............................................................................................................. 25
2.1 Presentation and Analysis of Secondary Data ........................................................................ 25
2.2 Presentation of Primary Data .................................................................................................. 34
2.2.1 Opinions on the most essential factor affecting the profitability ....................................... 34
2.2.2 Opinions on contribution of economic growth of the country on the company’s
profitability. ..................................................................................................................................... 35
2.2.3 Opinions on company’s ability to adapt marketing to be more profitable ....................... 35

6
 2.2.4 Opinions on the main problem impacting the profitability of the company .................... 36
2.2.5 Rating of the company amongst companies in Nepal as per respondents ........................ 37
2.3 Findings: ........................................................................................................................................ 38
CHAPTER-III ..................................................................................................................................... 39
SUMMARY AND CONCLUSION.................................................................................................... 39
3.1 Summary........................................................................................................................................ 39
3.2 Conclusion ..................................................................................................................................... 40
BIBLIOGRAPHY ............................................................................................................................... 43
APPENDIX-1....................................................................................................................................... 44
APPENDIX-2....................................................................................................................................... 48

List of Figures
Figure 1 ................................................................................................................................................. 26
Figure 2 ................................................................................................................................................. 27
Figure 3 ................................................................................................................................................. 28
Figure 4 ................................................................................................................................................. 29
Figure 5 ................................................................................................................................................. 30
Figure 6 ................................................................................................................................................. 31
Figure 7 ................................................................................................................................................. 32
Figure 8 ................................................................................................................................................. 33
Figure 9 ................................................................................................................................................. 34
Figure 10 ............................................................................................................................................... 35
Figure 11 ............................................................................................................................................... 36
Figure 12 ............................................................................................................................................... 37
Figure 13 ............................................................................................................................................... 38

7
 ABBREVIATION
PVT=Private

LTD=Limited

F. Y=Financial Year

8
 CHAPTER-I

INTRODUCTION

1.1 Background study of Profitability Analysis

The word Profitability is composed of two words, namely; profit and ability. The term profit
has already been discussed at length in detail. The term ability indicates the power of a firm to
earn profits. The ability of an enterprise also denotes its earning power or operating
performance. Also, that the business ability points towards the financial and operational ability
of the business. So, on this basis profitability may be defined as the ability of a given instrument
to earn a return from its use (Brown &Howard ,1975).

Weston and Brigham (1994) define profitability as the net surplus of a large number of policies
and decisions “. Profit being an absolute figure fails to indicate the adequacy of income and
changes in efficiency resulting from financial and operational performance of an enterprise.
Much difficulty and confusion comes home while interpreting the absolute figures of profit in
case of historical or inter firm comparison due to variation in the size of investment or volume
of sale etc. Such problems are handled by relating figures of profit either with the volume of
sales or with the level of investment.

A quantitative relationship is thereof established either in the form of ratios or percentages.

Such ratios are names as profitability ratios. Thus, profitability may be regarded as a relative
term measurable in terms of profit and its relation with other elements that can directly
influence the profit. No doubt, profit and profitability are closely related and mutually
interdependent, yet they are two different concepts.” The accounting concept of profit measures
what have been accumulated; the analytical concept of profitability is concerned with future
accumulation of wealth” (Basant,1978).

Chandra (2000) states that profitability is a measure of evaluating the overall efficiency of the
business. The best possible course for evaluation of business efficiency may be input-output
analysis. Profitability can be measured by relating output as a proportion of input or matching
it with the results of the same industry or results attained in the different periods of operations.

9
 1.1.1 Meaning of Company

A Company is a legal entity made up of an association of people, be they natural legal, or a

mixture of both, for carrying on a commercial or industrial enterprise. Company members
share a common purpose and unite in order to focus their various talents and organize their
collectively available skills or resources to achieve specific, declared goals (Tulsian ,2014).

Companies take various forms such as:

• Voluntary associations which may include non-profit organization.

• A group of soldiers.

• Business entities with an aim of gaining a profit.

• Financial entities and banks.

Paul(2000)states that a company or association of persons can be created at law as legal person
so that the company in itself can accept limited liability for civil responsibility and taxation
incurred as members perform (or fail) to discharge their duty within the publicly declared “birth
certificate” or published policy .Because companies are legal persons ,they also may associate
and register themselves as companies-often known as a corporate group .When the company
closes it may need a “death certificate” to avoid further legal obligations.

Company may be trading or manufacturing. According to The Law Dictionary, a

manufacturing corporation is “a corporation engaged in the production of some article been
subjected to artificial forces or to which something has been added to change its natural
condition.” Manufacturing companies are often structured with division of labour and task
specialization, so as to efficiently carry out the large-scale production of standardized products.

1.1.2 Origin and evolution of Companies

Business history deals with the history of business organizations, methods, government
regulation, labour relations, and impact on society. It also includes biographies of individual
companies, executives, and entrepreneurs. It is related to economic history. The history of
business is in many ways the history of business is in many ways the history of human is in
many ways the history of human society and civilization (Spender,2014).

Chaudhary (1977) explains the word “business” can potentially include almost all economic
activities undertaken by humans, but it may be more prudent to confine the term to activities

10
that involved production or exchange of articles or goods. The history of business, like the
history of economic activities, can be most easily divided into three phases-businesses in pre-
industrialized world, business during the industrialization and finally business in the networked
world.

1.1.3 History of companies in Nepal

The evolution of companies in Nepal also can be divided into parts:

1) Evolution of industry

2) Evolution of commerce

1) Evolution of companies:

Industrial development is the key to rapid economic progress of a country. Handicrafts and
cottage industries have been in Nepal since ancient time, but industrial development is still in
its infancy. Historically, the industrial development process began after with the establishment
of Biratnagar Jute Mill. It was the first joint stock company of Nepal established under
Company Act, this act has been revised in 1957,1964, and 1997(2053 chaitra). Nepal Bank
Limited was established in 1937 for the development and growth of industry and trade
(Basant,1978).

In between 1936 and 1949 a number of industries ,particularly in the fields of cotton textile
,sugar match ,hydropower ,rice, and oil mills ,and cigarettes were set up in the south eastern
and eastern terai region Between 1945 and 1949 ,the prevailing war time inflator conditions
and scarcity of goods in the market provided a rare opportunity to these enterprise to make high
profits .After the second world war ,the demand for the goods produced in Nepal went into
decline along with the profits which resulted fall in confidence in industries and
shutdowns(Chandra,2000).

The total number of public companies and proprietorship firms registered before 1950 reached
the figures of 59 and 299 respectively. In Nepal, development plans were implemented only
from 1956(2013 B. S). The First Year plan was implemented trial development corporation in
1959.In the same year, Nepal Factory and Factory Workers Act was also passed to allow
industrial development. In the plan period private firm registration act,1957 and industrial
policy ,1960 was announced (Pandey,1995).

11
In the Second Three Year Plan (1962-65) eleven public enterprise were established i.e. Birgunj
Sugar Factory, Janakpur Cigarettee Factory, In the private sector sugar, metal, handicraft, hotel,
soap, biscuit, and sweets industries, etc. were established. Patan and Hetauda Industrial Estates
were established in the plan period. The Third Five Year Plan (1965-70 recognized
industrialization as an essential component of economic growth and gave it third priority. In
this plan period, Bansbari Leather and Shoe Factory, Agriculture Tools Factory, Himal Cement
Company, Nepal Tea Development Corporation, Dairy Development Corporation, were
established (Chandra ,1994).

The Fourth, Fifth, Sixth, Seventh and Eighth Five Year Plans also emphasized the need to
attract private sector investment in industries. During Eight Plan HMG adopted privatization,
economic liberalization and open market policies. Keeping in mind the condition of public
enterprises, HMG initiated privatization efforts from the Eighth Plan. The new revised
industrial policy (1992) has been greatly liberalized and made transparent. Foreign Investment
and Technology Transfer Act (B.S.2050) was reviewed to attract foreign investment and to
emphasize the transfer of advanced technology and efficient management. The Ninth plan
(1997-2001) continued to emphasize on privatization and economic liberalization. The core
objectives of the Tenth plan (2002-2007) is participation or private sector and to create
additional employment in both rural and urban areas to reduce poverty(Paul,2000).

1.1.4 Introduction to Dabur Nepal Pvt. Ltd

Dabur Nepal Private Limited was established as an Independent Group Company in

1992.Established with the objective of making you look and feel good ,Dabur Nepal Private
Limited has a wide variety of herbal and Ayurvedic Personal Care products on offer
,categorized into various groups such as Hair Care (hair oil and shampoo Dabur Vatika Coconut
hair oil and Dabur Almond hair oil ;Dabur Vaitika –black olive and almond /henna and olive
/lemon Refresh /moisturizer ,Fem Fairness Bleach ,Dabur Uveda Rannge)and Baby Care
(Dabur lal Tel, etc) along with Oral Care (Dabur Red toothpaste, Dabur Babool toothpaste).

Utilizing local nature and natural resources for manufacturing ,Dabur Nepal has been
manufacturing and selling Ayurvedic medicine for over a century now .Established with the
vision of eco-sustenance and expanding Dabur resource and production base ,Dabur Nepal
Private Limited was set up in Nepal in the year 1992 as an independent group company .Dabur
Nepal has been involved in various fields and sectors such as health care ,personal care ,food

12
products ,home care and consumer health ethical along with professional range. Established
with the objectives of producing and dispensing Ayurvedic medicine to a wide mass of people
who had no access to proper treatment ,Dabur was the result of commitment and ceaseless
efforts of Dr.S.K Burman ,a physician living in Bengal ,in 1884 .He carried the mission of
providing effective and affordable cure for ordinary people in far flung villages and for that
purpose ,he started preparing natural cures for some of the killer disease of the time that are
cholera, malaria, and plague among others .His efforts paid up and he soon ,became famous
as`daktar`(Doctor)who had effective cures .The word “DaktarBurman” gave name to one of
the biggest ventures in South Asia ,known as Dabur .The small medicine manufacturer
company based in a small house in Calcutta soon became a household name all over India and
Nepal.

For its commitment and dedication to high quality services and products ,Dabur Nepal Private
Limited has received several rewards and honours such as Overall Excellence Award of Nepal-
India Chamber of Commerce and Industries in the year 2000 along with Best Exporter Award
of Export Promotion Board ,Ministry of Commerce ,His Majesty Government Nepal (now
Nepal Government) in the same year .Two years later ,in the (HACCP) plan verification for
manufacturing of fruits juices and tomato puree .In the same year ,it also managed to increase
its turnover by over 19 percent .In January 2003,its manufacturing facilities and systems got
certified for having met the requirements of Codex Alimentarious Commission Guidelines
,Recommended International Code of Practices and General Principals of Food Hygiene.

Under its health care sector ,the company offers wide variety of Ayurvedic and natural products
which offers complete care for varying needs of many individuals.The products that are made
in traditional Ayurvedic ways are tested and tried using most modern scientific methods which
ensures the quality and safety from the product .Some of the products under this division are
Pudin Hara and Hajmola for digestives ,Chyawanprash and Honey for health supplements and
DaburHonitus ,Gripe water and Dabur Lal Tail for OCT health care.

Dabur Nepal has also been involved in the production of consumer health products by blending
the traditional knowledge of drug manufacturing with scientific update. Redefining Ayurvedic
market and healthcare promotion activities, Daburs Consumer Health division looks after
marketing of Ayurvedic medicines and other products. More than 350 classical Ayurvedic
preparation methods at Dabur forms an important part of every Ayurvedic practitioner’s daily
practice. The products under this division are categorized as General Health care products

13
(Stresscom,Broncorid and Madhuvaani),Digestive support(Trifgol and Lipistat) and joint
support (Rheumatil Gel,Rheumatil Tab ,Rheumatil Oil and Mensta).

The Personal Range products of Dabur Company have made an immense contribution to the
professional grooming market. These products strive to meet the personal grooming needs of
the consumers who want to protect their skin from various factors. The personal products are
made available to the consumers through parlors, salons and some of its outlets all across the
country. Some of the products under this division are Oxylife Facial, Fem Queen’s Pearl Facial,
Fem Gold Facial and Fem Body Bleach.

1.2 Statement of Problem

For its commitment and dedication to high quality services and products, Dabur Nepal Private
Limited has received several awards and honours such as Overall Excellence Award of Nepal-
India Chamber of commerce and Industries in the year 2000 along with Best Exporter Award
of Export Promotion Board, Ministry of commerce ,His Majesty Government Nepal (now
Nepal Government ) in the same year. Two years later ,in the year 2002 it received the
Certificate of Hazard Analysis and Critical Control Point (HACCP) plan verification for
manufacturing of fruit juices and tomato puree .In the same year ,it also managed to increase
its turnover by over 19 percent .In January 2003,its manufacturing facilities and systems got
certified for having met the requirement of Codex Alimentarious Commission Guidelines
,Recommended International Code of Practices ,General Principles of Food Hygiene .The
company is also involved in many environmental conservation and other social activities to
stay committed to its Corporate Social Responsibility. Some of them are Medicinal Plants
Project (which attempts to protect the medicinal plants that have immense values in Ayurvedic
medicines), Nursery and Bee-keeping Development Program (for production of medicinal
plants and honey).

The study aims to find out the answer to the following questions:

• What is the performance of Dabur Nepal related to liquidity ratios?

• What is the performance of Dabur Nepal related to asset management ratios?

• What is the performance of the company related to Profitability ratios?

• What is the performance of the company related to Market value ratios?

• What is the performance of the company related to debt management ratios?

14
 1.3 Objective of the study
The main objectives of the study are to analyse financial performance and profitability of
Dabur Nepal through the use of different ratios other objectives of this study are as
following:

• To analyse the relationship between Working Capital Efficiency and

Profitability in Dabur Nepal

• To analyse the relationship between Liquidity and Profitability in Dabur Nepal

• To examine the relationship between Liquidity and Leverage of Dabur Nepal

• To examine the relationship between the size of the firm and profitability of
Dabur Nepal

1.4 Rationale of the study

The study will attempt to generate the idea about the export of its products in current and
past years and the prospects in the global market. This project will be helpful to those who
want to carry out the study regarding the product of Dabur Nepal in the future.

It would be helpful to find out the:

• Current situation of the Dabur Nepal.

• Decisions to make for the enhancement of handicraft styles.

• Emphasis on the quality of its products

• Techniques and tools for better promotion and profit.

• In this perspective, the current study will examine the Nepalese context of
quality services and its products. It would help in know the weak points and
making improvements, as there`s though competition in the global arena.

1.5 Review

1.5.1 Conceptual Review

Profitability analysis is a component of enterprise resource planning (ERP) that allows
administrators to forecast the profitability of a proposal or optimize the profitability of an
existing project. Profitability analysis can anticipate sales and profit potential specific to

15
aspects of the market such as customer age groups, geographic regions, or product types (Troy,
1996).

1.5.1.1 Importance of profitability Analysis

Profitability analysis can help key personnel in an enterprise to:

 Identify the most and least profitable clients.

 Identify the most and least profitable products or service.
 Discover which the sources of information offer the most reliable facts.
 Optimize responses to changing customer needs.
 Evolve the product mix to maximize profits in the medium and long term.
 Isolate and remedy the cause of decreasing profit margins.

1.5.1.2 Profitability Ratios

Here the profitability ratios that business owners should look at regular are Gross Profit Margin
Ratio, Operating Profit Margin Ratio, Net Profit Margin Ratio and Other Common Size Ratios.
The three measurements of profits – gross profit, operating profit and net profit – all come from
your company’s income statement (Troy, 1996).

Gross Profit Margin Ratio

Gross profit is what is left after the costs of goods sold have been subtracted from net sales.
(Cost of goods sold, also called “cost of sales,” is the price paid by your company for the
products it sold during the period you are looking at. It is the price of the goods, including
inventory or raw materials and labour used in production, but it does not include selling or
administrative expenses.)

The ratio of gross profit as a percentage of sales is an important indicator of your company’s
financial health. Without an adequate gross margin, a company will be an unable to pay its
operating and other expenses and build for the future.

Here is the formula to compute the gross profit margin ratio:

Gross profit margin ratio = (Gross profit/sales) x 100

A company’s gross margin is a very important measure of its profitability, because it looks at
your company’s major inflows and outflows of money: sales (money in) and the costs of goods
sold (money out). It is a real measure of profitability, because it must be high enough to cover
costs and provide for profits. Because it is an important barometer, you should monitor it

16
closely. In general, the company’s gross profit margin ratio should be stable. It should not
fluctuate much from one period to another, unless the industry the company is in is undergoing
changes which affect the costs of goods sold or pricing policies. The gross margin is likely to
change whenever prices or costs change.

Operating Profit Margin

The operating profit margin is an indicator of your company’s earning power from its current
operations. This is the core source of your company’s cash flow, and an increase in the
operating profit margin from one period to the next is considered a sign of a healthy, growing
company. (If your company’s operating income is not a sufficient to generate the cash you need
to keep operating, you must find other sources of cash.)

Here is the formula to compute the operating profit margin ratio:

Operating Profit Margin = (Operating Income/Sales) x 10

In general, the operating profit margin is an indicator of management skill and operating
efficiency. It measures your company’s ability to turn sales into pre-tax profits. It is a ratio that
you can use to compare your company’s competitive position to others in the same industry.
Because it looks at a company’s operating income before taxes are subtracted, the operating
profit margin is sometimes considered a more objective evaluator than the net profit margin
ratio.

Net Profit Margin Ratio

The formula for the net profit margin ratio is as follows:

Net Profit Margin Ratio = (Net Income/Sales) x 100

Other Common Size Ratios

While the calculation and evaluation of the gross profit margin ratio, the operating profit ratio,
and the net profit margin ratio are important, there are many other helpful tools you can use to
get real information from the data in your company’s income statement.

One of the most useful ways for the owner of a small business to look at the items listed on the
income statement is to see how each one relates to sales. This is done by constructing “common

17
size” ratios for the entire income statement. The phrase “common size ratio” may be unfamiliar
to you, but it is simple in concept and just as simple to create. You just calculate each line item
on the income statement as a percentage of total sales. (Divide each line item by total sales,
then multiply each one by 100 to turn it into a percentage.)

Profitability ratios compare income statement accounts and categories to show a company
ability to generate profits from its operations are:

Return on Capital Employed (ROCE)

Return on capital employed or ROCE is a profitability ratio that measures how efficiently a
company can generate profits from its capital employed by comparing net operating profit to
capital employed. It is a long-term profitability ratio because it shows how effectively assets
are performing while taking into consideration long-term financing. Return on capital
employed formula is calculated by dividing net operating profit or EBIT by the employed
capital.

Return on Equity (ROE)

The return on equity ratio or ROE is a Profitability ratio that measures the ability of a firm to
generate profits from its shareholder’s investments in the company. In other words, the return
on equity ratio shows how much profit each common stockholder’s equity generates. ROE is
also an indicator of how effective management is at using equity financing to found operations
and grow the company.

ROE = Net Income/shareholder’s equity

1.5.2 Empirical Review

The empirical literature is rich with studies in working capital management, although most of
them were carried out in the developed countries. We take a look at some of the recent ones
on the relationship between working capital management and firm performance.

Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN
2222-2847 (0nline) Vol.6, No.7, 2015 149 Jose, Lancaster and Stevens (1996) examined the
relationship between aggressive working capital management and profitability using data from
the united states companies. The result showed a significant negative relationship between cash
conversion cycle and firm performance.

18
Deloof (2003) investigated the relationship between working capital management and
corporate profitability of 1,009 large Belgian non-financial firms for the 1992-1996 periods.
The outcome of the study indicated a negative relationship between profitability (gross
operating income) and cash conversion cycle (and its two Components-Accounts Receivables
and Inventories, in number of days).

Lazaridis and Tryfonidis (2006) used data from 131 listed Greek companies for period of 2001
– 2004 to found out the relationship between working capital management and firm
performance. The finding showed a statistical significance between profitability (gross
operating profit) and the cash conversion cycle.

Ganeson (2007) examined the relationship between working capital management and firm
performance. A sample 349 telecommunication firms in the United States of America for a 7
year period (2001-2007) was used. Regression analysis was used to analyse the data and result
showed a negative relationship between working capital efficiency and profitability.

Raheman & Nasr (2007) utilized sample of 94 listed Pakistani companies from different sectors
for the period 1999-2004.The result showed a negative relationship between cash conversion
cycle(CCC), a measure of working capital management and profitability.

Falope&Ajilore (2009), using data from a sample of 50 Nigerian manufacturing companies

found a negative relationship between cash conversion cycle and net operating profit.

Sen&Oruc(2009) used data from 49 firms from Turkey to analyse the relationship between
working capital management and firm performance. The study confirmed a negative
relationship between cash conversion cycle and working capital both at firm and industry level.

Dong & Su(2010) investigated the relationship existing between profitability, the cash
conversion cycle and its components (Accounts Receivable ,Account payable and Inventory
,in number of days )for listed firms in Vietnam .Findings showed a strong negative relationship
between profitability ,measured through gross operating and cash conversion cycle .It is further
suggested that managers can create a positive value for the shareholders by handling the
adequate cash conversion cycle and keeping each different component to an optimum level.

Hayajneh & Yassine (2001) explored the relationship between working capital efficiency and
profitability of 53 listed Jordanian manufacturing firms for the period 2000-2006.Using both
OLS and 2SLS regression estimation techniques ,results showed a negative and significant

19
relationship between profitability and working capital management proxies(average receivable
collection period ,average conversion inventory period ,average payment period and cash
conversion cycle).It further suggested that a firm must manage its working capital efficiently
to achieve the optimal profitability.

Nwaobia ,Kajola &Adedeji (2012) examined the impact of working capital management on
firms financial performance of 30 Nigerian listed manufacturing firms for a period of 7 years
(2004-2010).The results revealed a negative relationship between working capital management
(cash conversion cycle) and firms financial performance (ROA). On the other hand, limited
studies confirmed a positive relationship between working capital management and firm
performance, suggesting that the more investment in working capital, the higher the
profitability. This theoretically confirmed the prediction of conservative working capital
policy.

In their study, Gill, Biger and Mathur (2010) investigated the relationship between working
capital management and firm performance of 88 American listed firms for the period 2005-
2007 and found a positive relationship between the two variables (cash conversion cycle and
corporate profitability).

In similar studies, Blinder and Maccini (1991) confirmed positive relationship between
working capital management and firm performance

According to Shim and Siegel (2000) accounting liquidity is the company’s capacity to
liquidate maturing short term debt (within one year). Maintaining adequate liquidity is much
more than a corporate goal is a condition without which it could not be reached the continuity
of a business. Solvency and liquidity are two concepts that are closely related and reflect upon
the actions of company’s working capital policy.

It is common to find reference to the fact that it is desirable to keep the company liquidity ratio
higher than 1.00. That would prove the firm’s ability to repay short-term commitments, with
the liquidation of short term assets. Any ration below 1.0 may mean that the business may not
be generating cash enough to meet the short term obligations(Morrel,2007).

However, as Matarazzo (2003) had stressed,” if an analyst is observing a company’s balance

sheet and face a liquidity ratio of less than 1.00 he shall not, in principle, consider it to be
unable to pay its debts on time.” The liquidity ratio would, according to the author, most

20
appropriately be interpreted as an indicator of the degree of independence of the company
against creditors and its ability to face crises and unexpected difficulties.

The authors used different measures of size (sales and total assets) and profitability (profit
margin and profit on total assets).

The part that firm plays in profitability was examined by Lee (2009) who used fixed effect
dynamic panel data model and performed analysis on a sample of more than 7000 US publicly-
held firms. According to him absolute firm plays a remarkable role in explaining profitability.

Ozgulbas etal(2006) have studied the effects of firm size on performance over the firms
operating in Istanbul Stock Exchange between the years of 2000 to 2005 .As a result of their
study ,they have found that big scale firms have a higher performance as compared to small
scale firms.

In a similar fashion, Jonsson(2007) has studied the relation between profitability and size of
the firms operating in Iceland .Results of the analysis showed that bigger firms have higher
profitability as compared to smaller firms.

Size profit relationship for the firms functioning in the financial services sector was tested by
Amaton and Burson (2007). They tested both linear and cubic form of the relationship. Even
though a negative influence of firm size on profitability was revealed with the linear
specification I firm size, evidence of a cubic relationship was detected between return on assets
and firm size.

Becker et al (2010) have studied the effects of firm size on profitability in the firms operating
in manufacturing sector in USA using the data of years 1987 to 2002.Results of the study
showed that negative and statistically significant relations exist between the total assets, total
sales and number of employees of the firms and their profitability.

Velnampy (2005) pointed a study on investment appraisal and profitability of toddy bottling
project in Sri Lanka which found that the management of the project failed to attain the
budgetary results, even though the Net Present Value (NPV), Internal Rate of Result(IRR) and
benefit cost ratio showed the project as commendable.

Velnampy(2006) studied the financial position of the companies and the relationship between
financial position and profitability with the sample of 25 public quoted companies in Sri Lanka
through the use of Altman Original Bankruptcy Forecasting Model .According to his verdicts,

21
out of 25 companies only 4 companies were in the danger of going bankrupt in the near future
.Moreover, he also found that in deciding the financial position of the quoted companies
,earning/total assets ratio ,market value of total equity/book value of debt ratio and sales/total
assets in times were the most significant ratios.

Banchuenvijit (2012) studied factors affecting performance of the firms operating in Vietnam.
A positive relation has been found between total sales and profitability of the firms but on the
contrary, a negative relation has been found between profitability and total assets. Additionally,
the author has found statistically non-significant results between number of employees and
profitability.

Velnampy and Nimalathansan (2010) studied the relationship between firm size and
profitability of all the branches of Bank of Ceylon and Commercial Bank in Sri Lanka over the
period of 10 years from 1997 to 2006.They observed that there was a positive relationship
between firm size and profitability in Commercial Bank, but there was no relationship between
firm size and profitability in Bank of Ceylon.

Velnampy(2013) discovered that there was no correlation between corporate governance and
firms performance measures .The sample of 28 manufacturing companies using the data
representing the period of 2007 to 2011 revealed that the determinants of corporate governance
were not correlated to the performance measures of the organization.

1.6 Research Methodology

The research methodology is the systematic, theoretical analysis of the methods applied to a
field of study. How the data is collected and which source the research use for getting the data
is under the research methodology. Research methodology is the crucial step that is carried out
by the researcher regarding their field visit. Our creativity leads us to make us our identity.
Research methodology evaluated the performance of the researcher. Research methodology
deals with collecting, presenting, and analysing data. For my research work, the necessary
materials are collected from Dabur Nepal Pvt. Ltd.

1.6.1 Research design:

“A research design is the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure.”
(Kothari,1989). In fact, the research design is the conceptual structure within which research is
conducted; it constitutes the blueprint for the collection, measurement and analysis of data. As

22
such the design includes an outline of what the researcher will do from writing the hypothesis
and its operational implications to the final analysis of data.

1.6.2 Sources of data

Primary Data: Primary data are taken by direct personal interview, indirect oral interview and
questionnaire. Data collected for the very first time for a specific purpose is called primary
data.

Secondary Data: Secondary Data refers to data that was collected by someone other than the
user. Common sources of secondary data for social science include censuses information
collected by government departments, organisational records and data that was originally
collected for other research purposes. Besides, formal and informal talk with the concerned
authorities and employees of the Dabur Nepal are also used to get additional information.

1.6.3Data collection techniques

 Interviews: Interviews can be conducted in person or over the telephone Interviews

can be done formally (structured), semi-structured, or informally. Questions should be
focused, clear, and encourage open-ended responses. Interviews are mainly qualitative
in nature.
 Questionnaires and Surveys: Responses can be analysed with quantitative methods
by assigning numerical values to Likert-type scales. Results are generally easier (than
qualitative techniques) to analyse. Pretest/Posttest can be compared and analysed.

 Observations: Allows for the study of the dynamics of a situation, frequency counts
of target behaviours, or other behaviours as indicated by needs of the evaluation. Good
source for providing additional information about a particular group, can use video to
provide documentation. Can produce qualitative (e.g., narrative data) and quantitative
data (e.g., frequency counts, mean length of interactions, and instructional time).

 Focus Groups: A facilitated group interview with individuals that have something in
common. Gathers information about combined perspectives and opinions. Responses
are often coded into categories and analysed thematically

23
  Ethnographies: Oral History, and Case Studies: Involves studying a single
phenomenon. Examines people in their natural settings. Uses a combination of
techniques such as observation, interviews, and surveys. Ethnography is a more holistic
approach to evaluation. Researcher can become a confounding variable.

 Documents and Records: Consists of examining existing data in the form of databases,
meeting minutes, reports, attendance logs, financial records, newsletters, etc. This can
be an inexpensive way to gather information but may be an incomplete data source.

 Data Analysis Tools

Data analysis tools means tools the research used to present and analysed the data. The
main tools of analysis are mathematical and statistical tools. In this reports statistical
and financial ratio tools is used for data analysis. Various statistical tools will be used
after compilation. The data will be process, tabulated and graphed to analyse and
achieve objectives of the study. Hence for the analysis and evaluation of the report,
tables and figures are used.

1.7 Limitations of the study

This study is simply a partial requirement of BBS programmed. There are so many
limitations in this study and some are given as follows:

• The validity of the study depends upon response of the employee

• The study is not representing overall company. It is micro study basically.

• It is very difficult to know the activities of each department due to short span of
Time.

• There are many factors that affect to the company. However, only those factors,

Which are related with the profitability, are considered in this study.

24
 CHAPTER-II
RESULTS AND FINDINGS

The fourth chapter will be the Data Presentation and Analysis, in this chapter the researcher
will collect show the data and present it in the desired manner through the use of table,
graphs, etc. and analysed by using the methods explained in earlier chapter.

2.1 Presentation and Analysis of Secondary Data

Presentation means the presentation of the collected data through table, figure etc. Presentation
is the process of understanding the study or the report and calculating the opinion. An analysis
of a data means the process where the process where the statement or the report gets resolve
by breaking them into simple statement. Analysis means to find out something and give opinion
about the presented data.

Margin Ratios

• Gross Profit Margin

• Operating Profit Margin
• Net Profit Margin

Returns Ratios

• Return on capital employed

• Return on equity

Liquidity Ratios

• Current Ratios
• Quick Ratio

Leverage Ratios

• Debt Ratios
• Debt to equity ratio

25
Margin Ratios

Margin ratios are employed to test the profitability of the firm:

Net profit margin ratios: It measures how the successful a company has been at the
business of making a profit on each rupee sales. It is one of the most essential financial
ratios.Net margin includes all the factors that influence profitability whether under
management control or not. The higher the ratio, the more effective a company is at cost
control.

Table no: 1

(NPR in lacs)

Fiscal Year Sales Net Profit Ratio

2015/16 80382.4 2128 0.02

2014/15 94009.60 7179.2 0.08

2013/14 86569.60 4728 0.05

2012/13 73752.01 3475.38 0.05

2011/12 68542.07 414.83 0.06

Source: Annual report of Dabur Nepal Private Ltd (from 2011/12 to 2015/16)

Net Profit Ratio

0.09
0.08
0.07
0.06
0.05
0.04 Net Profit Ratio
0.03
0.02
0.01
0
2015/16 2014/15 2013/14 2012/13 2011/12

Figure 1
Operating profit margin ratio: Operating margin takes into account the costs of
producing the product or services that are unrelated to the direct production of the product

26
 or services, such as overhead and administrative. It is calculated by dividing your operating
profit(OP) by your net sales(NS).

Table no: 2

(NPR in lacs)

Fiscal year Sales Operating profit Ratio

2015/16 80382.4 2337.6 0.03
2014/15 94009.60 8982.4 0.1
2013/14 86569.60 6080 0.07
2012/13 73752.01 4233.10 0.06
2011/12 68542.07 489.04 0.007

Source: Annual report of Dabur Nepal Private Ltd (from 2011/12 to 2015/16)

Operating Profit Ratio

0.12

0.1

0.08

0.06
Operating Profit Ratio

0.04

0.02

0
2015/16 2014/15 2013/14 2012/13 2011/12

Figure 2
In the above figure, Fiscal Years and Operating Profit Margin have been measured in X-axis
and Y-axis respectively.

From the above table it is clear that, operating profit has been increasing till 2014/2015 and has
decreased in 2015/2016. A higher operating margin is more favourable compared with a lower
ratio because this shows that the company is making enough money from its ongoing
operations to pay for its variable costs as well as its fixed costs.

27
Return Ratios:

Return on Assets (ROA): Return on Assets measures how efficiently a company can manage
its assets to produce profits during a period. Since company assets sole purpose is to generate
revenues and produce profits, this ratio helps both management and investors see how well the
company can convert its investment in assets into profits.

Table no: 3

(NPR in lacs)

Fiscal year Net income Assets Ratio

2015/16 2128 78593.6 0.03
2014/15 7179.2 71934.4 0.09
2013/14 4728 60312.8 0.07
2012/13 3475.38 51926.03 0.06
2011/12 414.83 44314.73 0.009

Source: Annual report of Dabur Nepal Private Ltd (from 2011/12 to 2015/16)

Return on Asset Ratio

0.1
0.09
0.08
0.07
0.06
0.05
Return on Asset Ratio
0.04
0.03
0.02
0.01
0
2015/16 2014/15 2013/14 2012/13 2011/12

Figure 3
In the above figure, Fiscal Year and ROA have been measured in X-axis and Y-axis
respectively.

28
It shows that return on assets ratio of the company is not stable in last five fiscal years. There
is high fluctuation in return on assets ratio. And there is very low return on assets ratio in last
fiscal year’s i.e. 2015/16.

Return on Equity (ROE): Return on equity is the amount of net income returned as a
percentage of shareholder’s equity. Return on equity measures a corporation profitability by
revealing how much profit a company generates with the money shareholders have invested.
In other words, the return on equity ratio shows how much profit each common stockholder’s
equity generates. ROE is also an indicator of how effective management is at using equity
financing to fund operations and grow the company.

Table no: 4

(NPR in lacs)

Fiscal year Net income Equity shareholders fund Ratio

2015/16 2128 31739.2 0.07
2014/15 7179.2 29268.6 0.25
2013/14 4728 24216 0.19
2012/13 3475.38 18130.72 0.19
2011/12 414.83 14655.32 0.03

Source: Annual report of Dabur Nepal Private Ltd (from 2011/12 to 2015/16)

Return on Equity Ratio

0.3

0.25

0.2

0.15
Return on Equity Ratio
0.1

0.05

0
2015/16 2014/15 2013/14 2012/13 2011/12

Figure 4
In the above figure, Fiscal Years and ROE have been measured in X-axis and Y –axis
respectively.

29
Higher values are generally favourable meaning that the company is efficient in generating
income on new investment. Investors should compare the ROE of different companies and also
check the trend in ROE over time. From the above table it is clear that ROE is highest in the
year 2014/15 and decreased in the year 2015/16.

Liquidity Ratio: Liquidity ratios measure a company’s ability to pay debt obligations and its
margin of safety through the calculation of ratios including the current ratio, quick ratio, and
operating cash flow ratio.

Current Ratio:

Table no: 5

(NPR in lacs)

Fiscal Year Current Assets Current liabilities Ratio

2015/16 52812.8 46756.8 1.13
2014/15 45155.2 42288 1.06
2013/14 43320 32734.4 1.32
2012/13 34781.6 32719.84 1.06
2011/12 30851.76 28327.31 1.09

Source: Annual report of Dabur Nepal Private Ltd (from 2011/12 to 2015/16)

Current Ratio
1.4
1.2
1
0.8
0.6 Current Ratio

0.4
0.2
0
2015/16 2014/15 2013/14 2012/13 2011/12

Figure 5
In the above figure, Fiscal Years and Current Ratio have been measured in X-axis and Y-axis
respectively.

30
The current ratio is a liquidity ratio that measures a company’s ability to pay short-term and
long-term obligations. Liquid ratios should be 1. From the above table, it is clear that current
ratio of the company is satisfactory.

Quick Ratio: The quick ratio is measure of how well accompany can meet its short term
financial liabilities. It is also known as the acid-test ratio.

Table no:6

(NPR in lacs)

Fiscal Years Quick Assets Current Liabilities Ratio

2015/16 33193.6 46756.8 0.70
2014/15 27254.4 42288 0.64
2013/14 14759 32734.4 0.45
2012/13 26588.8 32719.84 0.81
2011/12 15789.43 28327.31 0.55

Source: Annual report of Dabur Nepal Private Ltd (from 2011/12 to 2015/16)

Quick Ratio
0.9

0.8

0.7

0.6

0.5

0.4 Quick Ratio

0.3

0.2

0.1

0
2015/16 2014/15 2013/14 2012/13 2011/12

Figure 6
In the above figure, Fiscal Years and Quick Ratio have been measured in X-axis and Y-axis
respectively.

Ideally, quick ratio should be 1:1.

31
If quick ratio is higher, company may keep too much cash on hand or have a problem collecting
its account receivable. Higher quick ratio is needed when the company has difficulty borrowing
on short term notes. A quick ratio higher than 1:1 indicates that the business can meet its current
financial obligations with the available quick funds on hand.

A quick ratio lower than 1:1 may indicate that the company relies too much on inventory or
other assets to pay its short term liabilities. From the above table, it is clear that quick ration of
the company is not satisfactory.

Leverage Ratios: A leverage ratio is meant to evaluate a company’s debt levels. The most
common leverage ratios are the debt ratio and debt-to-equity ratio.

Debt ratio: A debt ratio is simply a company’s total debt divided by its total assets. The
formula is:

Debt Ratio= Total Debt/Total Assets

Table no:7

(NPR in lacs)

Fiscal Year Total debt Total Assets Ratio

2015/16 97.6 78593.6 0.001
2014/15 78.4 71934.4 0.001
2013/14 121.6 60312.8 0.002
2012/13 10725.49 51926.03 0.02
2011/12 1322.11 44314.73 0.03

Source: Annual report of Dabur Nepal Private Ltd (from 2011/12 to 2015/16)

Debt Ratio
0.035
0.03
0.025
0.02
0.015 Debt Ratio
0.01
0.005
0
2015/16 2014/15 2013/14 2012/13 2011/12

Figure 7

32
In the above figure, Fiscal Years and Debt Ratio have been measured in X-axis and Y-axis
respectively. In the general, a lower ratio is better. Value of 1 or less in debt ratios shows good
financial health of a company. From the above table it is clear that debt ratio of the company
is satisfactory as it is decreasing.

Debt to equity ratio: The debt-to-equity ratio is a measure of the relationship between the
capital contributed by creditors and the capital contributed by owners. It also shows the extent
to which shareholders equity can fulfil a company’s obligation to creditors in the event of
liquidation.

Debt-to-equity Ratio=Total Debt/Total equity

Table no:8

(NPR in lacs)

Fiscal Year Total debt Total equity Ratio

2015/16 97.6 798.52 0.12
2014/15 78.4 798.52 0.09
2013/14 121.6 798.52 0.15
2012/13 1075.49 798.52 1.34
2011/12 1322.11 798.52 1.66

Source: Annual report of Dabur Nepal Private Ltd (from 2011/12 to 2015/16)

Debt to Equity Ratio

1.8
1.6
1.4
1.2
1
0.8 Debt to Equity Ratio
0.6
0.4
0.2
0
2015/16 2014/15 2013/14 2012/13 2011/12

Figure 8
In the above figure, Fiscal Years and Debt to Equity Ratio have been measured in X-axis and
Y –axis respectively.

33
In general, a high debt-to equity ratio indicates that a company may not be able to generate
enough cash to satisfy its debt obligations. However, low debt-to-equity trios may also indicate
that a company is not taking advantage of the increased profits that financial leverage may
bring. This is why comparison of debt ratios is generally most meaningful among companies
within the same industry, and the definition of a “high” or “low” ratio should be made within
this context.

2.2 Presentation of Primary Data

As a primary data collection questionnaire method was adopted, altogether five questions
regarding the profitability analysis of Dabur Nepal Pvt. Ltd were asked to 20 respondents.

2.2.1 Opinions on the most essential factor affecting the profitability

Among the various factors affecting the profitability, the respondents were asked to select one
from the following factors. The table below shows the response obtained from the respondents.

Table no 9

Response on factors affecting profitability

Factors No .of respondents Percentage

Demand 10 50
Management 6 30
Substitutes 4 20
Total 20 100

No. Of respondents

Demand
Management
Substitutes

Figure 9
From the Table above, it is observed that the demand has the most influence on the profitability
of the company since 50 percent of the respondents have considered it as an important factor

34
affecting profitability. Similarly, it is observed that 30 percent of the respondents believe that
managements the most significant on profitability and remaining 20 percent believe that
substitutes have significant impact on profitability.

2.2.2 Opinions on contribution of economic growth of the country on the company’s

profitability.
Response of the respondents when asked about the contribution of economic growth of the
country on the company’s profitability is shown on the table below:

Table no 10

Response on contribution of economic growth of the country on the profitability

Response Frequency of Agreement Percentage

Yes 14 70
No 6 30
Total 20 100

Frequency of Agreement

Yes
No

Figure 10
As per the table ,70 percent of the respondents believed that the economic growth of the country
contributes to the company’s profitability and remaining 30 percent of the respondents
disagreed with the statement.

2.2.3 Opinions on company’s ability to adapt marketing to be more profitable

Response of the respondents when asked about the company’s ability to adapt marketing to
be more profitable is shown on the table below:

35
 Table no 11

Response on company’s ability to adapt marketing to be more profitable

Response Frequency of Agreement Percentage

Yes 12 60
No 8 40
Total 20 100

Frequency of Agreement

Yes
No

Figure 11
As per the Table above, 60 percent of the respondents agreed that the company’s ability to
adapt marketing to be more profitable and remaining 40 percent of the respondents disagreed
with the statement.

2.2.4 Opinions on the main problem impacting the profitability of the company
Among the various problems affecting the profitability, the respondents were asked to select
one from the following problems. The table below shows the response obtained from the
respondents.

36
 Table no 12

Response on problem affecting profitability

Problems No of respondents Percentage

Low product prices 6 30
High unseen costs 6 30
Competition 8 40
Total 20 100

No. Of Respondents

Low Product Prices

High Unseen Costs
Competition

Figure 12
From the Table above, it is observed that 40 percent of the respondents believe competition as
the main problem affecting profitability. Similarly, it is observed that each 30 percent of the
respondents believe that low product prices and high unseen costs as the main problem
affecting profitability respectively.

2.2.5 Rating of the company amongst companies in Nepal as per respondents

Respondents were asked to rate Dabur Nepal Pvt. Ltd among the currently operating
companies in Nepal. Their response was as follows:

37
 Table no 13

Rating of Dabur Nepal Pvt. Ltd

Rating No. of respondents Percentage

High 8 40
Middle 10 50
Low 2 10
Total 20 100

No. Of Respondents

High
Middle
Low

Figure 13
From the above table ,50 percent of the respondents rated Dabur Nepal Pvt Ltd as middle level
,40 percent as high level and remaining 10 percent as low level company.

2.3 Findings:
The collected data can be presented in the form of diagram and graph. They are simple methods
of representing the data the form of bars, graphs, pie-charts, lines etc. The present the data/fact
into the simpler form and show the significant features of whole at a glance. A clear idea of the
variation in the value of a variable are much more easily obtained through diagrams or graphs
than by the values given in the table.

38
 CHAPTER-III
SUMMARY AND CONCLUSION

This chapter is dedicated to provide summary and conclusion after collecting and analysing the
financial data of Dabur Nepal.

3.1 Summary
A company is a legal entity made up of an association of people, be they natural, legal, or a
mixture of both, for carrying on a commercial or industrial enterprise. Company members share
a common purpose and unite in order to focus their various talents and organize their
collectively available skills or resources to achieve specific, declared goals.

A manufacturing corporation is a corporation engaged in the production of some article, thing,

or object, by skill or labour, out of raw material, or from matter which has already been
subjected to artificial forces, or to which something has been added to change its natural
condition. They are often structured with division of labour and task specialization so as to
efficiently carry out the large scale production of standardized products.

Integrated and speedy developed of the country is possible only when competitive
manufacturing company reach every nooks and corners of the country. Today number of
manufacturing company are concentrated in only few places because lack of development of
infrastructure in remote places. Government must give attention toward remote places.

Business plays vital role in the economic development of nations. So today it is challenging
for government to formulate the business and industrial policy rationally in remote area.
Actually more than 60% of total areas of Nepal is covered with rural areas. for the economic
development of rural areas, it is necessary to develop industrial and business sector in rural
areas.

The research work entitled the comparative study on profitability analysis of Dabur Nepal Pvt.
Ltd. To evaluate the profitability of the company, we have divided the whole report to different
chapters. In every chapter, there are several sub-chapters. The first Introduction chapter gives
background information about the project work, introduction of Dabur Nepal, problem
statements, objectives, rationale, and limitation of the study. The second literature review
chapter includes conceptual review and review of related studies. The third chapter called
methodology. includes design, sources of data, data collection techniques and data analysis

39
tools. The fourth chapter called Presentation and Analysis of Data, we tried to analyse its
profitability through Ratio Analysis. By using this financial tool, we computed different ratios
to evaluate Profitability Position and Financial Position.

To know the real performance of Dabur Nepal, the researcher observed and analysed the
profitability analysis of the company for five years’ period. It is hoped that the comparative
profitability analysis of the company will give a rational result and represent the overall
scenario in terms of performance analysis.

Ratio analysis is a very significant tool to financial performance analysis. It is one of the means
by which financial stability, wealth, viability, and performance of a firm can be judged. Current
ratio of Dabur Nepal is more than its theoretical norm that is 2:1. Its current ratio 1.13 in the
year 2015/16. But, there is not matter to worry about because the company has kept enough
liquid assets. It is clear that current ratio of the company is satisfactory.

Ideally, quick ratio should be 1:1. Its quick ratio is 0.07 in the year 2015/16. A quick ratio
lower than 1.1 may indicate that the company relies too much on inventory or other assets to
pay its short-term liabilities. From the figure, it is clear that quick ration of the company is not
satisfactory. It should manage cash properly because cash on hand doesn’t generate any
income. In aggregate, there is nothing to be worried about the liquidity position of the company
since its quality of current assets is very good which can be easily converted into cash within
short period without any loss of its assets.

The debt position is also favourable to the management because it has not borrowed much loan
from banks and institutions in the last years which is in decreasing trend.

The profitability position of the company is much satisfactory. The net profit of the company
has increased as compared to its increment in investment.

3.2 Conclusion
Chapter titled Profitability Analysis of Dabur Nepal Pvt. Ltd describes the conceptual
framework of financial efficiency and profitability. Financial efficiency is the ability of a given
investment to earn a return from its use. It’s vital instrument to measure not only the business
performance but also overall efficiency in its concerned. In present study seven types of
measurement tools of financial efficiency were discussed i.e. Gross profit ratio, operating profit
ratio, net profit ratio, return on capital employed, return on equity, return on assets, current
ratio, quick ratio, debt equity ratio, and debt ratio.

40
Here the profitability ratios that business owners should look at regularly are Gross Profit
Margin Ratio, Operating Profit Margin Ratio, Net Profit margin measures how successful a
company has been at the business of making a profit on each rupee sales. Net profit margin
ratio of the company has been at the business of making a profit on each rupee sales. Net profit
margin ratio of the company shows decreasing trend throughout the study period. In last year
2015/16, the ratio was 2 percent. So, it shows that the company is in satisfactory position.
Operating profit has been increasing till 2014/2015 and has decreased in 2015/2016. Return on
Assets ratio measures a corporation’s profitability by revealing how much profit a company
generates with the money shareholders have invested. Higher values are generally favourable
meaning that the company is efficient in generating income on new investment. From the study
it is clear that ROE is highest in the year 2014/2014 and has decreased in the year 2015/16.

The liquidity ratio measures the ability of affirm to meet its short-term obligations and select
the short –term financial solvency of a firm. The liquidly position of the company in term of
current ratios shows that the ratios of the company are always below the normal standard (i.e.
2:1). It shows that the liquidity position in term of current assets to current liabilities of the
company is better. So, it is concluded that the company has better short term solvency position.
Quick ratio should be 1:1. Its quick ratio is 0.07 in the year 2015/16. From the figure, it is clear
that quick ratio of the company is not satisfactory.

A leverage ratio is meant to evaluate a company’s debt level. The total debt to total
shareholder’s fund ratio of the company is 12% in 2015/16. The capital structure position in
terms of total debt to shareholder’s equity ratio of the company is very low. The average of
total debt to shareholder’s equity ratio implies that the proportion of outsiders claim, in the
total capitalization, is lower. Total debt to total assets ratio implies a banks success in exploiting
debts to be more profitable as well as its capital structure.

The total debt to total assets ratio of the company is 0.70 in 2015/16. Total debt to total assets
ratio of the company is lower. From this analysis, capital structure ratio has clearly referred
that total debt to shareholder’s fund and total assets are slightly lower.

Finally, company has to seek the other prospective customer and other market for increase the
market area. Limit market area is not sufficient to sale the product and gaining the aspect of
the profit. The firm consider not only making more profit but also consider social factor too
because the firm is existing in the society and operate in this society. So the firm sees over the

41
social welfare while operating. Hence, firm as to oversee the welfare and senior about the cost
of production, sales of production customers wants, demand of products and markets.

42
 BIBLIOGRAPHY
Agrawal,G.R.(2005);Project Management in Nepal.

Basant, A.(1978);Corporate Financial Management

Brigham,E.F. & Houston,J.F.(2004);Fundamental of Financial Management

Brown,J.R. & Howard,L.R.(1975);Principles & Practice of Management Accounting

Chandra,N.R.(2000);Financial Accounting for Management

Chandra ,P.(1994);Financial Management Theory and Practice

Dabur Nepal official website www.daburnepal.com

Hampton, J.J.(2005);Financial Decision Making

Khan, M.Y. & Jain,P.K.(1998);Financial Management

Kuchhal ,S.C.(1968); Ratio Charts for Top Management

Pandey,I.M.(1995);Financial Management

Paul,C.(2000);Corporate Accounting

Paul,R.&Singh,j.(1982); Management Accounting

Spender,J.C.(2014); Business Strategy

Troy,L.(1996);Alamance of Business &Industrial Financial Ratios

Van,H.& James,C-(1998);Financial Management Policy

Weston,J.F. &Brigham,E.F.(1994);Management Finance

43
 APPENDIX-1
DABUR NEPAL PVT.LTD

FIVE YEARS COMPARATIVE BALANCE SHEET

CAPITAL
&
2015/16 2014/15 2013/14 2012/13 2011/12
LIABILITI
ES
1. Share 8,21,96,53,2 4,79,98,89,9 2,89,31,83,1 2,33,79,65,7 1,94,81,93,2
Capital 00 46 90 60 65
2. Reserves 1,37,08,31,3 1,25,33,60,4
84,95,78,821 83,70,67,333 77,24,91,811
and Surplus 56 17
3.
Debentures 40,00,00,000 40,00,00,000 75,00,00,000 75,00,00,000 75,00,00,000
& Bonds
4.
25,78,75,000 - - - -
Borrowings
5. Deposit 59,32,04,03, 48,15,41,98, 39,99,18,14, 30,59,20,46, 25,96,05,98,
Liabilities 977 449 567 237 154
6. Bills
2,44,42,098 1,10,88,599 55,28,477 18,89,881 26,63,146
Payable
7. Proposed
Cash 3,93,28,484 - - 2,05,08,472 -
Dividend
8. Income
Tax
- 36,34,548 - - -
Liabilities
(net)
9. Other
75,61,52,013 44,47,74,384 44,62,74,103 37,96,83,498 38,19,90,587
Liabilities
TOTAL
CAPITAL
70,38,86,86,12 54,66,31,64,74 45,34,01,60,75 34,91,91,61,18 29,81,59,36,96
AND
9 7 4 1 3
LIABILITIE
S

ASSETS 2015/16 2014/15 2013/14 2012/13 2011/12

1. Cash 1,36,88,70,07 1,03,18,02,43
68,78,21,707 50,35,98,351 35,77,04,910
Balance 3 1
2.
4,09,21,70,46 3,75,95,61,49 3,94,39,15,02 4,33,92,11,50 2,87,12,38,02
Tangible
4 3 0 0 0
asset
3.Trade
receivabl
67,51,69,349 65,95,06,142 30,29,35,653 48,83,86,316 23,61,98,630
e and
stock
4. Cash
11,76,90,181 3,37,09,145 68,05,04,605 72,18,75,000 44,33,29,112
and cash

44
equivale
nt
5.
9,43,98,08,09 7,42,24,22,11 6,45,43,63,35 4,70,04,17,78 5,41,75,69,58
Investme
0 8 7 4 7
nt
6. Loans,
Advance
51,88,67,52,2 39,63,42,49,1 30,97,13,38,0 22,72,38,46,7 19,69,38,19,5
s and
76 29 37 99 78
Bills
Purchase
7. Fixed 1,15,61,50,75 1,02,37,71,42
50,11,91,496 43,53,58,624 43,77,39,766
Assets 5 8
8.Capital
- - - - -
WIP
9. Other 1,65,20,74,94 1,09,81,42,86 1,79,80,90,87 1,00,64,66,80
35,83,37,360
Assets 1 0 9 7
TOTAL
70,38,86,86,129 54,66,31,64,747 45,34,01,60,754 34,91,91,61,181 29,81,59,36,963
ASSETS
Income Statement
PARTICULA
2015/16 2014/15 2013/14 2012/13 2011/12
RS
1. Interest 4,68,28,11,0 3,07,25,65,4 2,57,76,74,0 2,48,93,15,2 2,37,67,34,73
Income 78 79 00 83 3
2. Interest 3,02,81,84,2 1,76,54,21,9 1,61,81,31,3 1,66,70,26,7 1,45,18,99,41
Expenses 50 38 21 65 1
Net Interest 1,65,46,26,8 1,30,71,43,5
95,95,42,680 82,22,88,518 92,48,35,322
Income 28 41
3.
Commissio
27,09,38,621 23,14,98,217 21,62,88,075 19,46,05,671 13,92,94,980
n and
Discount
4. Other
Operating 22,71,63,292 16,50,54,628 15,10,53,433 10,38,98,937 8,86,37,367
Income
5.
Exchange 19,40,86,682 14,51,98,062 12,03,81,572 12,01,84,980 11,73,38,453
Income
Total
2,34,68,15,4 1,84,88,94,4 1,44,72,65,7 1,24,09,78,1 1,27,01,06,12
Operating
23 48 60 06 3
Income
6. Staff
41,25,53,789 32,69,72,145 27,28,58,131 23,99,96,869 20,73,72,944
Expenses
7. Other
Operating 48,56,47,278 36,38,19,537 32,23,79,964 26,57,03,864 24,05,02,808
Expenses
8.
Exchange - - - - -
Loss

45
 Operating
Profit
before
1,44,86,14,3 1,15,81,02,7
provision 85,20,27,665 73,52,77,374 82,22,30,371
57 66
for
Possible
Loss
9.
Provision
9,97,33,114 19,64,08,921 24,39,44,905 7,36,54,773 18,60,37,811
for Possible
Losses
Operating 1,34,88,81,2
96,16,93,846 60,80,82,761 66,16,22,601 63,61,92,559
Profit 42
10. Non-
Operating
16,07,68,005 2,00,30,360 2,38,88,228 2,57,44,242 1,29,71,950
Income
/(Loss)
11. Write
back of
Provision 4,90,84,000 10,93,90,510 1,57,56,000 5,37,40,785 1,01,87,031
for Possible
Losses
Profit
from 1,55,87,33,2 1,09,11,14,7
64,77,26,988 74,11,07,629 65,93,51,541
Regular 47 15
Operations
12.
Profit/(Loss
) from
67,69,363 1,74,500 - 3,00,000 12,00,000
Extra-
Ordinary
Activities
Net Profit
after
1,56,55,02,6 1,09,12,89,2
including 64,77,26,988 74,14,07,629 66,05,51,541
10 15
all
Activities
13.
Provision
14,23,18,419 9,92,08,110 5,88,84,272 6,74,00,694 6,00,50,140
for Staff
Bonus
14.
Provision
- - - -
for Income
Tax
* Provision
for Current 41,20,50,631 30,00,74,975 16,76,71,449 20,35,66,831 18,54,77,731
Year's Tax
* Provision
- 2,06,39,720 2,21,977 -
for

46
 Previous
Years' Tax
* Deferred
Tax
45,09,390 -57,60,767 47,53,366 -44,16,384 -48,18,910
Expense/
(Income)
Net 1,00,66,24,1 10,04,61,53,9
67,71,27,177 41,61,95,924 47,48,56,488
Profit/Loss 70 06

47
 APPENDIX-2
Format of Questionnaire on

Profitability Analysis of Dabur Nepal Pvt. Ltd

Questionnaire

Section 1: Respondent profile

1. Full name:

2. Gender:

3. Age:

4. Job Position:

5.Experience:

Section 2: Information relating to Profitability Analysis

1.What is the essential factor affecting profitability of the company?

• Demand

• Management

• Substitutes

2.Do you believe economic growth of the country contributes to the company’s profitability?

• Yes

• No

3.Is the company able to adopt marketing to be more profitable

• Yes

• No

4.Which of the following is the main problem which has impact on the company’s
profitability?

• Low product prices

• High Unseen costs

• Competition

5.Which of the following rank do you give to the company amongst the companies in Nepal?

• Top

48
• Middle

• Low

49