Financial Performance Analysis of Nestle India LTD: Amal Biju

FINANCIAL PERFORMANCE ANALYSIS OF NESTLE
INDIA LTD
PROJECT REPORT
Submitted to Mahatma Gandhi University in partial fulfillment
Of the requirements for the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted by
AMAL BIJU
(Reg. No. 190031000616)
Under the guidance of

Mr. JIBUMON K G
Faculty Guide
Accredited by NAAC with ‘A’ Grade
DEPARTMENT OF MANAGEMENT STUDIES
MAR ATHANASIOS COLLEGE FOR ADVANCED STUDIES
TIRUVALLA
2021
MAR ATHANASIOS COLLEGE
FOR ADVANCED STUDIES
TIRUVALLA
Ph: 0469 2730323 Fax: 0469 2730317 macfast@macfast.org
www.macfast.org
CERTIFICATE
This is to certify that the project report entitled “FINANCIAL
PERFORMANCE ANALYSIS OF NESTLE INDIA LTD” is a bonafide
report of the project work undertaken by AMAL BIJU, fourth semester MBA
student of our college during the period of 8 weeks commencing from1stApril to
31stMay 2021
Mr.Jibumon K G Dr.Sudeep B Chandramana

Faculty Guide Head, Dept. of management Studies
Rev. Dr.Cherian J Kottayil UniversityExaminer
Principal
DECLARATION
I hereby declare that this project report entitled “FINANCIAL

PERFORMANCE ANALYSIS OF NESTLE INDIA LTD” is a bonafide
report of the study undertaken by me, under the guidance of Mr.Jibumon K G,
Department of Management Studies, MACFAST, Tiruvalla.
I also declare that this project report has not been submitted to any other
University or Institute for the award of any degree or diploma.
Place : Tiruvalla
Date : 31/05/2021 AMAL BIJU

ACKNOWLEDGEMENTS
First and foremost, I thank the Lord Almighty, for his perpetual shower of blessings, which
led to the successful completion of my project.
I take this opportunity to express my deep sense of gratitude to all those who have helped me
throughout this project. It gives me immense pleasure to acknowledge all those who have
rented encouragement and support for the successful completion of this work.
I express my profound gratitude and sincere thanks to Fr. Dr. Cherian J. Kottayil, principle
of MACFAST, Tiruvalla.
I express my heartfelt thanks to Dr.Sudeep B. Chandramana, head of department of
management studies, MACFAST, Tiruvalla for inspiration and valuable suggestions for
carrying out this endeavour.
I express my deep sense of gratitude to Mr.Jibumon K G, the faculty member department of
management studies, MACFAST, for encouraging and inspiring me for developing the
project.
My project work involves many people at different stages. I would like to thank all those who
have directly or indirectly contributed to the success of the project.
I also take this opportunity to express profound gratitude to my parents, family members and
several people who have contributed for the successful completion of the project. It is my
duty and pleasure to acknowledge them.
AMAL BIJU
LIST OF TABLES
Table No. Particulars Page
NO
5.1 CURRENT RATIO 44-45
5.2 AACIDE TEST RATIO 45-46
5.3 ABSOLUTE LIQUID RATIO 47
5.4 DEBT EQUITY RATIO 48
5.5 PROPRIETARY RATIO 49-50
5.6 FIXED ASSET TO NETWORTH RATIO 51
5.7 FIXED ASSET TURNOVER RATIO 52
5.8 CAPITAL TURNOVER RATIO 53
5.9 WORKING CAPITAL TURNOVER RATIO 54-55
5.10 GROSS PROFIT RATIO 55-56
5.11 NET PROFIT RATIO 56-57
5.12 NET PROFIT 57-58
5.13 ESTIMATEDPROFITFOR 2020-2021 to 2024-25 60
5.14 NET SALES 62

5.15 ESTIMATED SLAES FOR 2020-21 TO 2024-25 64
5.16 COMPARITIVE BALANCE SHEET OF NESTLE INDIA LTD FOR 66
THE YEAR 2015-16

THE YEAR 2016-17
THE YEAR 2017-18
THE YEAR 2018-19
THE YEAR 2019-20
LIST OF FIGURES
Fig No: Particulars Page No

5.1 NET PROFIT FROM 2015-16 TO 2019-20 59
5.2 ESTIMATED PROFIT FOR 2020-21 TO 2024-25 61

5.3 NET PROFIT FROM 2015-16 TO 2019-20 63
5.4 ESTIMATED SALES FOR 2020-21 TO 2024-25 65
ABBREVIATIONS:
B.C : Before Christ

Eg : exempli gratia
GDP : Gross Domestic Product
GPS : Global Positioning System
LTD : Limited
MSMT : Multi-Service Management Team
PVT : Private
USDA : United States Department of Agriculture
WCP : World Class Performance
WKS : Weeks
R&D : Research and Development
GP : Gross Profit
NP : Net Profit
CONTENTS
Page No.
ACKNOWLEDGEMENT :
LIST OF TABLES :
LIST OF FIGURES :
ABBREVIATIONS :
Sl.NO CHAPTERS PAGE NO
INTRODUCTION 1-4
01
1.1 Background of the study 2-3
1.2 Statement of the problem 3
1.3 Relevance and scope of the study 3
1.4 Objectives of the study 4
PROFILE OF TYRE INDUSTRY 5-26
2.1 Business process of the study 7-11

02 2.2 market demand supply-contribution to GDP-Revenue generation 11-15
2.3 level and type of competition- firms operating in the industry 15-16
2.4 pricing strategies in the industry 17-21
2.5 prospects and challenges of the industry 21-24
2.6 key drivers of the industry 24-26
REVIEW OF LITERATURE 27-39
03 3.1 Brief theoretical construct related to the problem 28-37

3.2 An overview of earlier studies 37-39
3.3 Uniqueness of research study 39
METHODOLOGY OF THE STUDY 40-42
04 4.1 Research Approach and design 41

4.2 Sources of online data 41
4.3 Data analysis tools 41
4.4 Report structure 41
4.5 Limitation of the study 52
05 DATA ANALYSIS, INTERPERATION, INFERENCE 43-70
06 FINDINGS 71-72
07 CONCLUSION 73-74
BIBLIOGRAPHY 75
ANNEXURES 76-79
CHAPTER 1
INTRODUCTION
1
1.1BACKGROUND OF THE STUDY
Finance is the keystone for all kind of economic and business activities. It is one of the basic
foundations for all business enterprise. It plays an important role in the continuity and growth
of the business. It is the matter key, which provides access to all resources for being
employed in manufacturing and merchandising activities. It is a fact that business needs
finance to make more money. Financial performance analysis includes analysis and
interpretation of financial statement in such a way that it undertakes full diagnosis of
profitability and financial soundness of the business
Finance is an essential part of every economic or business activity. It is one of major
resources needed for business. So, it is called life blood of business. Without finance no
business can survive. Just as the smooth flows of blood to the different parts of the body is
essential for the survival of a human being. So also, the supply of adequate finance for the
different activities of a business is indispensable to its success. Financial Management is now
become an increasingly important function within a firm.
A company’s financial performance can be revealed by with the help of introduction
contained in financial statements. Financial Statements are sources of information on the
basis of which conclusions are drawn about the profitability and financial position of a
concern. A financial statement is a collection of data organized according to logical and
consistent accounting procedure. It may show a position of a moment in time as in the reveal
case, of balance sheet or may several a series of activities over a given period of time as in
the case of income statement.
Thus, the financial statements provide a summarized view of financial position and
operations of the firm. To diagnose the information contained in financial statements. Judge
the profitability and financial soundness of the firms. So, the financial analysis is essential.
Financial analysis that provides comparison of various components with that of previous year
should be made to know the changes that taken place in the business over several years.
The field of finance refers to the concept of time, money and risk. Finance plays an
important role in the progress of the business. Finance holds the key to all activities. Without
correct financial planning a new enterprise is unlikely to be doing well. Managing money is
essential to ensure a safe future, both for the individual and a company. Now a day, finance is
used by individuals (in the form of personal finance), by government (as public finance), by
business (corporate finance), as well as by a broad modern money-oriented economy.
2
Finance is the one of the basis foundation of all kinds of economic activities. It helps the
enterprise to be dynamic, it is therefore necessary that there should be proper administration
of finance i.e., inflow and outflow of cash should be regularized and controlled to the firm.
The FMCG industry create the financial sources from the people and mobilize saving for
investment in the industrial projects of FMCG industry. FMCG industry provides various
types of services to customers in return for payment on one form or another. They have been
existence in India for the past several decades. NESTLE INDIA LTD is one of the leading
Food and beverage manufacturers in India. The company was incorporated in the year 28th
March 1959.
1.2 STATEMENT OF PROBLEM

Every organization needs finance for the smooth running of its activities. This is a double
edged sword and if not used properly, it will become a liability. It is very important to
manage all functions efficiently and effectively in order to avoid unnecessary investment. A
proper analysis and interpretation of the statement enables the firm to judge the profitability
and financial strength of their business. The present study entitled “Financial performance of
NESTLE INDIA LTD” is undertaken in order to evaluate the financial performance of the
company for the last five years commencing from 1st April 2015 to 31st March 2020.
1.3 RELEVANCE AND SCOPE OF THE STUDY
 The study of financial statement helps the company to understand their overall
profitability position, solvency position and long term financial performance of the
company.
 The aim of the study was to understand past performance of the company, present
financial condition, and to find suggestions for the improvement future profitability.
 The scope of the study is limited to analyses the efficiency of the financial
management of JK Tyre & Industries Ltd. Is based on the financial statements
collected from the website.
3
1.4 OBJECTIVES OF THE STUDY
 To evaluate the financial performance of NESTLE INDIA LTD, for a period of five
years (2015-16 to 2019-20) .
 To determine the long term financial solvency position of the NESTLE INDIA LTD
to examine the liquidity position of the company for the reference period of the study.
 To estimate the trend in sales and profit of the firm.
4
CHAPTER 2
INDUSTRY PROFILE
5
Products which have a quick turnover, and relatively low cost are known as Fast Moving
Consumer Goods (F.M.C.G.). Between 1950 and 1980, there was limited investment in
the FMCG sector. Local people had lower purchasing power, which meant that people
opted for necessity products rather than premium products. Indian government was
inclined towards Favouring the local shops and retailers. Between 1980 and 1990, people
wanted more variety of products which encouraged FMCG companies to increase the
availability of products. FMCG Industry started getting traction and other companies
started entering the industry. Media industry in India also boomed during the same time
which gave new companies even more incentive to make their business profitable. Prior
to 1991, when globalization and liberalization occurred in India, western apparels and
foreign food products were not available to local customers. Common people weren’t
very aware of brand recognition. After 1991, FMCG industry was inspired by the
international companies which also allowed government intervention to incentivise
foreign FMCG companies to operate in India.The Indian FMCG industry generates
massive employment opportunities and currently employs more than 3 million
people. Departmental stores, grocery stores, and super markets are the places where
consumers buy the necessary products for daily consumption. In the 21st century, people
don’t want to move across different stores to acquire the common household goods.
Hence, the introduction of supermarkets, where customers have variety of choices for
different household products, into localities are proving to be extremely convenient to the
customers. Some of the most common stores in India are: Reliance Retail, Big Bazaar, D-
Mart, Easy day, MORE, Spencer’s, Spar, Hyper City, and Star Bazaar. Although the
operations of supermarkets are profitable, local grocery stores are suffering due to lack of
variety of products. Unlike other emerging FMCG industry around the world, FMCG
sector in India is still quite conventional. Despite street markets are still one of the most
visited places for shopping in urban and rural settings, online platforms are leading the
way to buy FMCG products.
F.M.C.G. products are those that get replaced within a year. Examples of F.M.C.G.
generally include a wide range of frequently purchased consumer products such as
toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as
well as other non-durables such as glassware, bulbs, batteries, paper products, and plastic
goods. F.M.C.G. may also include pharmaceuticals, consumer electronics, packaged food
products, soft drinks, tissue paper, and chocolate bars. India’s F.M.C.G. sector is the
fourth largest sector in the economy and creates employment for more than three million
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people in downstream activities. Its principal constituents are Household Care, Personal
Care and Food & Beverages. The total F.M.C.G. market is in excess of ₹. 85,000 Crores.
It is currently growing at double digit growth rate and is expected to maintain a high
growth rate. F.M.C.G. Industry is characterized by a well-established distribution
network, low penetration levels, low operating cost, lower per capita consumption and
intense competition between the organized and unorganized segments.
Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian
economy with Household and Personal Care accounting for 50 per cent of FMCG sales in
India. Growing awareness, easier access and changing lifestyles have been the key growth
drivers for the sector. The urban segment (accounts for a revenue share of around 55 per
cent) is the largest contributor to the overall revenue generated by the FMCG sector in
India However, in the last few years, the FMCG market has grown at a faster pace in rural
India compared with urban India. Semi-urban and rural segments are growing at a rapid
pace and FMCG products account for 50 per cent of total rural spending.
In India, companies like ITC, H.U.L., Colgate, Cadbury and Nestle have been a dominant
force in the F.M.C.G. sector well supported by relatively less competition and high entry
barriers (import duty was high). These companies were, therefore, able to charge a premium
for their products. In this context, the margins were also on the higher side. With the gradual
opening up of the economy over the last decade, F.M.C.G. companies have been forced to
fight for a market share. In the process, margins have been compromised.
2.1 BUSINEES PROCESS OF THE STUDY
The basic business processes involved primary and supporting business processes.
1. Primary Business Process

 Outbound Sales Logistics
 Operations
 Marketing
 Service
2. Supporting Business Process
7
 Procurement
 Human Resources
 Technology Department
 Firm Infrastructure
For over the centuries, Nestle has expanded their business rapidly all over the globe. It
is very popular among the consumers as the product has been giving out positive
feedback.
PRIMARY BUSINESS PROCESSES OF NESTLE
1. OUTBOND SALES LOGISTICS
 Distributing products and services to customers.

 Nestle prefers distributing their products by servicing in land transportation rather
than rail train or short sea shipping because the possibilities of their product to
deliver in good shape is higher.
 Use big lorries that can load more products to avoid empty runs.
 Send the stock to each Nestle branch around India
 Distribution are made with many kind of grocery shops' such as Tesco and Giant.
2. OPERATIONS
 Transforming inputs into products or services.
 Nestle have a lot of types of food which includes junior foods, milk, breakfast
cereals, hot cereals, creamer, beverages, coffee, culinary products, chilled dairy,
ice cream, confectionery & chocolate and many more.
 For each product that they have, it will have its own ingredients and raw materials
that they need. For instance, manufacturing of chocolate.
 The input are the raw materials needed such as cocoa, milk and many more.
 The process which will be done by the machine such as whipping of the
ingredients then froze the ready-made chocolate in chiller.
 Finally, the outputs are the chocolates that have been packaged in their own brand
which is Nestle.
8
3. MARKETING
 Helping customers to buy the products or services of the firm.

 The most important thing to do with food business in Malaysia is that the foods
must be based with Halal materials and is approved by higher authorities that it is
officially Halal where the Muslims can consume it peacefully.
 All ingredients that contained in the product are all labeled accurately on the
container of the food.
 Running a food based business is not an easy task as many advertising need to be
done.
 However, Nestle is brilliant in attracting their potential customers and also existing
customers.
 Many types of advertisement that is made by Nestle such as through television
commercials and flyers that is passed around at the shopping mall and many more.
4. SERVICE
 Post sale support provided to customers such as repairs and maintenance function.
 Nestle provides its official website for the consumers to review its products.
 It is very helpful as all functions and purposes of product are stated clearly and are
a satisfactory.
 The website has a very welcoming vision.
 Make people that consume the product feels healthy, happier and prevent from
getting diseases because if the good nutrition in their food and beverages products.
 Sugar content in Nestle product has been reduced to 34% and salt level has been
reduced to 75%
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SUPPORTING BUSINESS PROCESS OF NESTLE
1. PROCUREMENT
 Buying the resources needed to carry out the entity is the primary activities.
 Finding potential supplier.
 Nestle have a lot of supplier around the world to keep them always available with
raw materials needed to manufacture products.
2. HUMAN RESOURCES
 Recruiting and hiring new employees.
 Training, paying salary and employee benefits.
 Nestle is not only good in producing nutritional products, they are good in
attracting people to join their company.
 Nestle have given many job opportunities to the public with many different positions.
 Advertising of job in website and newspaper.
 Nestle have also given useful information in the website for the one who is
interested to work with them.
 Nestle is also known as one of the companies that took care of their employees'
rights and duties.
3.TECHNOLOGY DEVELOPMENT
 Activity to improve company's product or services.

 Nestle have a department of 'Research and Development' to make sure that they
are always up to requirements of the public.
 It is a costly thing to do for company but it pays back the cost with double profit.
 Having the department of 'Research and Development' helps Nestle a lot in
healthy competition aspect.
 Nestle also use solar panels in warehouse as energy consumption.
 Nestle is a very economically friendly company.
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4. FIRM INFRASTRUCTURE
Nestle has a very stable infrastructure. It is all planned properly by expertise and high
education people who have a lot of experience in the nutrition field. It has its own
accountant, lawyers, administrative and other officers to do their significant job that has
been assigned. Below are the members in the board of director and is assigned to its own
job.
2.2 MARKET DEMAND AND SUPPLY- CONTRIBUTION TO GDP-

REVENUE GENARATION
Fast moving consumer goods (FMCG) are the fourth largest sector in the Indian
economy. There are three main segments in the sector – food and beverages which
accounts for 19 per cent of the sector, healthcare which accounts for 31 per cent and
household and personal care which accounts for the remaining 50 per cent.
The FMCG sector has grown from ₹2,20,852.4 crore (US$ 31.6 billion) in 2011 to ₹
3,68,669.75 crore (US$ 52.75 billion) in 2017-18. The sector is further expected to grow
at a Compound Annual Growth Rate (CAGR) of 27.86 per cent to reach ₹ 7,24,759.3
crore (US$ 103.7 billion) by 2020. FMCG market is expected to grow at 9-10 per cent in
2020. FMCG urban segment witnessed growth rate of 8 per cent whereas rural segment
grew at 5 per cent in quarter ended in September 2019; supported by moderate inflation,
increase in private consumption and rural income.
Accounting for a revenue share of around 45 per cent, rural segment is a large contributor
to the overall revenue generated by the FMCG sector in India. Demand for quality goods
and services have been going up in rural areas of India, on the back of improved
distribution channels of manufacturing and FMCG companies. Urban segment accounted
for a revenue share of 55 per cent in the overall revenues recorded by FMCG sector in
India.
FMCG Companies are looking to invest in energy efficient plants to benefit the society
and lower costs in the long term. Patanjali will spend ₹ 5,197.85 crore(US$ 743.72
million) in various food parks in Maharashtra, Madhya Pradesh, Assam, Andhra Pradesh
and Uttar Pradesh. Dabur is planning to invest ₹ 250-300 crore (US$ 38.79-46.55 million)
in FY19 for capacity expansion and is also looking for acquisitions in the domestic
11
market. Investment intentions, related to FMCG sector, arising from paper pulp, sugar,
fermentation, food processing, vegetable oils and Vanaspati, soaps, cosmetics and
toiletries industries, worth 19,846 crore (US$ 2.84 billion) were implemented up to
November 2019.
Growing awareness, easier access, and changing lifestyles are the key growth drivers for
the consumer market. The focus on agriculture, MSMEs, education, healthcare,
infrastructure and tax rebate under the Union Budget 2019-20 is expected to directly
impact the FMCG sector. These initiatives are expected to increase thedisposable income.
Favorable demand drivers such as rising income levels and growing urbanization, among
others, have recently encouraged major and diverse investments in the FMCG sector.
While top FMCG companies are expanding their capacity to feed the growing domestic
demand, homegrown brands have ventured into international markets.
The consumer products industry has been growing at a brisk pace in the past few years
backed by robust economic growth and rising rural income. Growth drivers such as
premiumization, rapid urbanization, evolving consumer lifestyles and emergence of
modern trade have shielded the industry from the slowdown. The consumer products or
the Fast Moving Consumer goods (FMCG) sector is valued at ₹1.6 trillion. The industry
is urban-centric with 66% share of the goods being consumed by urban India.
Metropolitan cities & small towns have been driving the FMCG consumption in urban
India since 2002. In fact middle India, comprising of the small towns and consuming 20%
of overall FMCG sales, has been growing the fastest across rural and urban segment.
The FMCG market size of middle India is set to expand from ₹ 287 billion in 2010 to
over ₹ 4 trillion by 2026. Rural India, where 70% of the population resides but only 34%
consume FMCG goods, presents the biggest market potential for the industry. Backed by
low unit packs and aggressive distribution reach, rural market size has expanded four
times to ₹ 564 billion since 2002. Companies such as Nestle, Hindustan Unilever and
Dabur which derive nearly half their sales from rural India have been increasing their
reach. FMCG goods are retailed through two primary sales channels - General Trade and
Modern Trade. General Trade, comprising of the ubiquitous kirana stores, is the largest
sales channel forming 95% of overall retail sales. However, growth of consumer goods
retailed through Modern Trade channel is outpacing the growth of FMCG products in
General Trade. Factors such as a comfortable and modern store experience, access to a
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wide variety of categories and brands under a single roof and compelling value-for-
money deals are attracting consumers to organized retail in a big way.
The FMCG sector is the fourth largest industry in India contributing nearly 20% to the
Gross Domestic Product. FMCG, or fast-moving customer goods, sector refers to
three main categories of products: Personal care, housing, and food. This sector
witnessed growth through leaps and bounds in its early years of development;
however, in the last few years, its growth has flat-lined. This is mainly due to
government policy and changes in the overall marketplace. Surprisingly, these
changes have turned favorable for the sector starting from this year. The FMCG sector
is predicted to undergo the highest level of growth in its history in India. It is expected
to grow at higher single-digit and even lower-double digit levels in the October-
December Quarter of FY2018. FMCG sector is set to grow at a compound annual
growth rate of 20.36% up to the year 2020 and set to grow by as much as $100 billion.
India is a very diverse market, therefore when it comes to the growth and
development of any industry; there are always a multitude of factors which play a role
in this development. FMCG is no exception. There are a variety of factors which can
potentially promote its growth. Until recently, there was a massive gap between the
rural and urban households, with the urban area having a greater competitive edge.
Yet as witnessed over the last few years of government implementation of programs
for the upliftment of the rural population, specifically, doubling the farmer’s incomes
has brought about a notable shift. According to recent reports, 50% of the demand for
FMCG retail comes from the rural areas. Retailers have recognized this increased
demand and made every effort possible to meet it. With the help of technological
advancements and its vast reach, retailers have easily been able to this meet this huge
part of the potential demand in the rural areas.
The FMCG sector is one of the major industries in the Indian market. Such an
industry flat-lining in growth is not a pretty sight for the economy. Favorable
government policies and a conscious management have managed to bring FMCG
back to one of the fastest growing sectors in the market. Such a huge sector plays a
huge role in GDP and employment, indicating a positive sign for India’s future.
The Gross Domestic Product popularly known as GDP of an economy requires

contribution from major industries to be healthy. India is largely an agrarian
13
economy; so agriculture makes the major contribution to the GDP. Role of major
industries in India GDP is important as based on this only the total GDP is calculated.
In terms of US Dollar exchange rate India's economy is the twelfth largest. Despite
witnessing a slowdown, due to the global recession, India's economy has huge
potential of expansion. As far as the economic scenario is concerned India is surely on
a roll. The last twenty years have really proved extremely beneficial for India.
The country now stands only after Brazil as far as GDP ranking is concerned. India
has replaced Russia and grabbed the second position in the global forefront mostly
due to the strategic planning and huge amount of expenditures on education in India.
India is expected to cross the 8 percent mark and move to 9 percent GDP growth rate.
India is the second largest populated country in the world sheltering over one billion
people. Although India has not had a striking 10 percent year over year economic
growth as its neighbor China it has still managed to grow at a nominal rate. India's
GDP growth has been slow but careful. According to trade pundits India will take the
third position as far as GDP growth in concerned by 2020 replacing Germany, the
UK, and Japan. Only United States and China will be ahead of it. All the important
sectors in India have shown positive signs of growth from the last five years. Let us
have a close look at the sector wise growth rate in India from the period 2010 to 2011.
Indian exports increased by 26.8 per cent (y-o-y) and touched US$ 18.9 billion in
November 2010(The period April 2010 to November 2010 exports in the country
grew by 26.7 per cent to US$ 140.3 billion. On the other hand imports increased to
US$ 222 billion.). This rapid growth in the exports from India urged the Indian
Government to conclude that the total shipments in 2010-11 might go up to US$ 215
billion. FMCG companies have been wary of taking up product prices on account of
this inflation. In the fourth quarter of the 2011-12 financial years, for instance, while
volume growth was 09 to 15 per cent for most FMCG companies, price-led growth
was five to 10 per cent only. The trend was no different for the first three quarters of
the 2011-12 year, with price-led growth in the region of five to 10 per cent, as
companies focused on volumes. Analysts say a good rainfall this year will be critical
in keeping this volume-sales momentum going.
Revenue from operations is a measure of how much revenue a company is generating

from its core business. Revenue from operations does not include income from non-
operating activities such as sales of assets, sale of subsidiaries, income from
14
investments made etc. Revenue from operations/share measures how much revenue a
company is generating from its core business on per share basis. Nestle India’s
Revenue from Operations/Share in 2012 was ₹ 864.4 per share while in 2016b it
improved to ₹. 956.63per share. Almost 45% of the company’s revenue comes from
the milk and nutrition segment. The second highest contributor to company’s revenue
is the prepared dishes and cooking aids segment. One of the top contributors of
revenue in this segment is Magi brand. This segment of the company contributes 29%
to the revenue of Nestle India. The third category is the chocolate and confectionery
business which includes brands like Munch and Kit Kat. Almost 13% of company’s
revenue comes from this segment. Similarly, beverages segment which includes,
brand like Nestea and Nescafe also contributes 13% to the total revenue of the
company.
2.3 LEVELS AND TYPES OF COMPETITION- FIRMS OPERATING

IN THE INDUSTRY
India's huge population has always been a significant factor for the growth of FMCG
sector in the country. Between 1950 and 1980, the consumption of FMCG products was
relatively low due to the low per capita income. The post-liberalization era in India has
witnessed a massive growth in the selling of products in the domestic market. The Indian
market also imported loads of products from overseas markets which made increased the
competition.
The easing of the trade barriers encouraged the MNCs to invest in the Indian market to
cater to the needs of the consumers. The living standards rose in the urban sector due to
high disposable income along with the rise in the purchasing power of the rural families
which increased the sales volume of various manufacturers of the FMCG products in
India. On the contrary to this, Nestle has always targeted the market of urban India and
focuses largely upon the value added products for the elite class or upper middle class
population. Like any other business, the strong sophisticated growth of consumption and
customer demand for FMCGs charge this industrial sector with fierce rivalry among
different competitors. Factors like new firms setting up and threatening to become
potential competition and products being substituted by similar ones further contribute to
market saturation. Everyone wants to increase their market share while retaining existing
customers.
15
Last but not the least, the bargaining powers of both suppliers as well as buyers is
additional forces to reckon with. The major competitive drivers focused upon in this
article are the market, cost, and quality of the products.
The market of FMCG is very competitive and manufacturers are coming forward with the
latest ideas and techniques to beat the competition and remain on the top. A recent boon
the market of FMCG is very wide and the demand of FMCG products will increase in the
coming future. Companies plan competitive strategies in order to attract and connect to
the potential customers. The goal of designing a competitive strategy is to provide better
service to the consumer at low price and stand ahead of the competitor.
Five main competitive strategies are:
 Overall low cost leadership strategy

 Best cost provider’s strategy
 Broad differentiation strategy
 Focused low cost strategy
 Focused differentiation strategy
In the FMCG sector has made it highly competitive.
FMCG is an industry where the competition goes on for years. There are so many tactics
to fight competition in FMCG, that the companies do not back off and from time to time
they keep introducing new measures to ward off competitors. Furthermore, this industry is
pockmarked with unorganized competition wherein small and medium manufacturers also
give tough competition to established companies. Companies which have been in
competition with each other for years.
Dairy milk is one of the most marketed and most liked chocolates across India. At the
same time, Cadbury celebrations are a popular gifting product and targets occasions and
festivals with an emotional touch. In this rivalry, Nestle is quite far behind but has always
been the thorn in an otherwise flawless leadership by Cadbury. Where Nestle has Kitkat,
Cadbury has Perk. Similarly, Cadbury has its own version of Eclairs. Thus, these FMCG
rivals are set to be rivals for the coming years. Though, it can be forecasted that Nestle will
remain the challenger and Cadbury the market leader.
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2.4 PRICING STRATEGIES IN THE INDUSTRY
 PREMIUM PRICING
Use a high price where there is a uniqueness about the product or service. This
approach is used where a a substantial competitive advantage exists. Such high prices
are charge for luxuries such as Cunard Cruises, Savoy Hotel rooms, and Concorde
flights.
 PENETRATION PRICING
The price charged for products and services is set artificially low in order to gain
market share. Once this is achieved, the price is increased.
 ECONOMY PRICING
This is a no frills low price. The cost of marketing and manufacture are kept at a
minimum. Supermarkets often have economy brands for soups, spaghetti, etc.
 PRICE SKIMMING
Charge a high price because you have a substantial competitive advantage. However,
the advantage is not sustainable. The high price tends to attract new competitors into
the market, and the price inevitably falls due to increased supply. Manufacturers of
digital watches used a skimming approach in the 1970s. Once other manufacturers
were tempted into the market and the watches were produced at a lower unit cost,
other marketing strategies and pricing approaches are implemented. Premium pricing,
penetration pricing, economy pricing, and price skimming are the four main pricing
policies/strategies. They form the bases for the exercise. However there are other
important approaches to pricing.
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 PSYCHOLOGICAL PRICING
This approach is used when the marketer wants the consumer to respond on an
emotional, rather than rational basis. For example 'price point perspective' 99 cents
not one dollar.
 PRODUCT LINE PRICING
Where there is a range of product or services the pricing reflect the benefits of parts of
the range. For example car washes. Basic wash could be $2, wash and wax $4, and the
whole package $6.
 OPTIONAL PRODUCT PRICING
Companies will attempt to increase the amount customer spend once they start to buy.
Optional 'extras' increase the overall price of the product or service. For example
airlines will charge for optional extras such as guaranteeing a window seat or
reserving a row of seats next to each other.
 CAPTIVE PRODUCT PRICING
Where products have complements, companies will charge a premium price where the
consumer is captured. For example a razor manufacturer will charge a low price and
recoup its margin (and more) from the sale of the only design of blades which fit the
razor.
 PRODUCT BUNDLE PRICING
Here sellers combine several products in the same package. This also serves to move
old stock. Videos and CDs are often sold using the bundle approach.
 PROMOTIONAL PRICING
Pricing to promote a product is a very common application. There are many examples
of promotional pricing including approaches such as BOGOF (Buy One Get One
Free).
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 GEOGRAPHICAL PRICING
Geographical pricing is evident where there are variations in price in different parts of
the world. For example rarity value, or where shipping costs increase price.
 VALUE PRICING
This approach is used where external factors such as recession or increased

competition force companies to provide 'value' products and services to retain sales.
 PREDATOR PRICING
(Also known as destroyer pricing) is the practice of a firm selling a product at very
low price with the intent of driving competitors out of the market, or create a barrier
to entry into the market for potential new competitors. If the other firms cannot
sustain equal or lower prices without losing money, they go out of business. The
predatory price then has fewer competitors or even a monopoly, allowing it to raise
prices above what the market would otherwise bear. In many countries, including the
United States, predatory pricing is considered anti-competitive and is illegal under
antitrust laws. However, it is usually difficult to prove that a drop in prices is due to
predatory pricing rather than normal competition, and predatory pricing claims are
difficult to prove due to high legal hurdles designed to protect legitimate price
competition.
 LIMITPRICING
A Limit Price is the price set by a monopolist to discourage economic entry into a
market, and is illegal in many countries. The limit price is the price that the entrant
would face upon entering as long as the incumbent firm did not decrease output. The
limit price is often lower than the average cost of production or just low enough to
make entering not profitable.
 LOSE LEADER
In marketing, a loss leader (also called a key value item in the United Kingdom) is a
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type of pricing strategy where an item is sold below cost in an effort to stimulate
other, profitable sales. It is a kind of sales promotion
5 COMMON WAYS FMCG MESS UP PRICING AND PAY THE PRICE
1. Consumer price based on Product Cost only
Make a product for $1 and sell it for $1.50 (50% mark -up) based on some
internal guideline. This is more common with less sophisticated
organizations and they end up Pricing too Low resulting in lost profit, or
Pricing too high which results in lower sales units. Either way, it is a
lottery, though the only savin g grace is that the product does not make a
loss.
2. Issue Price Guidelines without limits on percentage of units sold on

Promotional Prices
This is more common than many would like to believe. Sales and
Marketing teams issue these types of guidelines in l arger organizations. At
times they do
not place a limit on the percentage of units that can be sold at promotional
prices, or simply do not communicate them clearly or install che cks in the
system. Sales teams tend to oversell at the lower promotional prices,
which then erodes profitability.
3. Do not align Pricing with Brand Positioning
In some organizations Marketing finalizes the Brand Positioning and

suggests Pricing at an overall level while Category Management or Trade
Marketing own the detailed pricing strategies and tactics. This can be
detrimental unless there is very close alignment between sales and
marketing. Price is probably the most important Positioning tool in the
marketers armory. Think about your quality and features perception of two
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cars without knowing anything else about them. One is for $20,000 and
the other is for $120,000. Which one will most consumers believe to have
better quality with many value added fe atures etc. Misaligned Pricing with
Positioning results in diffused consumer perceptions and sub -optimal sales
and market share.
4. Decide Pricing without understanding the Category and

Competition pricing
Sometimes in smaller, less sophisticated organiza tions management does

not spend the bare minimum money to buy category and competition data.
A walk down to the supermarket and pricing is decided. They do not
recognize how sophisticated brands use deep pricing at times to drive trial
without adversely impacting brand equity over a large period of time. And
occasionally in large global multi-nationals there are stark errors in the
analysis, not because they don't have the data (in fact many such large
organizations have been sold excessive and irrelevant d ata by their
data/analytics/research providers but more due to internal tunnel visioning
(biases) which tends to disregard critical metrics and sometimes even
ends up looking at an irrelevant competitive set (market segment).
5. Do not have a working P&L to evaluate various Price Levels & Unit
Sales mix
While this appears to be elementary, you will be surprised how many

organizations run large and complex spreadsheet based models which only
a specific analyst can drive to extract relevant metrics. Every Br and
Manager and Sales Manager must have a simple spreadsheet to evaluate
various pricing scenarios by simply changing a few of the variables. Such
a spreadsheet does come free with the Pricing Strategy Course launched
by FMCG Academy.
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2.5 PROSPECTS AND CHALLAENGES OF THE INDUSTRY
BIGGEST CHALLENGES IN FMCG
Here are some of the most interesting Trends and challenges in FMCG Industry
1. Big Data
Data explosion is underway as the ability to acquire, store, and process data continues
to improve exponentially. The FMCG world already had weekly consumer sales,
brand tracking, consumer panels, shopper data from friendly and well-compensated
retailers and another few hundred metrics depending on which data/analytics
organization you talk to. 95% of the data being generated and sold to eager marketers
and analysts is useless. The smarter organizations will buy only the relevant data
(manage information costs), deduce the correct linkages to consumer behavior and use
it effectively to develop products, manage trade and communicate effectively to
consumers.
2. Social Media
Information now moves at a rapid speed. A tweet, FB post or a YouTube video can go
viral in hours. No longer can an organization sell a product that was unsalable in a
developed market due to health concerns in another less developed market as
regulations had not caught up. Regulations will take the time to catch up but
consumer information is just a Google search away. Information dissemination will be
rapid and with no place to hide. Smarter brands will employ innovative methods to
use this effectively to reach globally while limiting brand communication costs.
3. Online Grocery Shopping
This is growing rapidly in most developed markets albeit off a small base. While most
major brick and mortar retailers now offer online shopping and delivery, the birth of
smaller online retailers with tight product lines and deeper prices will begin to
emerge. And when some of this tight range online retailer grow big, brands which
grew on the strength of adding a new flavor or fragrance every quarter will struggle as
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category and range management for a 500 SKU business will be easier, but brutal for
brand owners.
4. Environment & Sustainability
Organizations that can demonstrate sustainability across their total ecosystem will
benefit from stronger consumer bonding scores. However the ability to charge a
premium to cover increased costs will remain limited as consumers will increasingly
see sustainability as a given rather than a perk to be afforded by few. The Tesla of the
FMCG world is still to be created – using new innovations and technologies.
5. Ageing
How different would a supermarket product range look if everyone shopping there
was 50+? Filled with fresh foods, fish (salmon), wholegrain and few premium sweet
offerings along with a large aisle of health supplements. This demographic has more
money and will place a higher value on food quality. The challenge will be for brands
to appear relevant to this aging demographic while being ‘cool’ enough to attract the
younger consumers.
PROSPECTUS OF FMCG
 Market research
Market research is the key. Without the necessary information, it becomes difficult to
understand the requirements of the customers. It provides critical information and
direction. It identifies market needs and wants, product features, pricing, decision
makers, distribution channels, motivation to buy. They're all critical to the decision
process.
 Timing
Are elements of the process coordinated? Is production on the same time schedule as
the promotion? Will the product be ready when you announce it? Set a time frame for
the rollout, and stick to it. Many products need to be timed to critical points in the
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business cycle. There are marketing tales galore about companies making new
product announcements and then having to re-announce when the product lags behind
in manufacturing. The result is loss of credibility, loss of sales, and another failure.
 Capacity
If the new product or service is successful, do you have the personnel and manufacturing
capacity to cope with the success? Extended lead times for new products can be just as
deadly as bad timing.
 Testing
Test market the new product. Be sure it has the features the customer wants. Be sure the
customer will pay the price being asked. Be sure the distributor and sales organization
are comfortable selling it. You may need to test your advertising and promotion as well.
 Distribution
Who’s going to sell the product? Can you use the same distribution channels you
currently use? Can you use the same independent representatives or sales force? Is
there sufficient sales potential in the new product to convince a distributor, retailer, or
agent to take on the new line? There are significant up-front selling costs involved in
introducing new products. Everyone in the channel wants some assurance that the
investment of time and money will be recovered.
 Training
The sales organization involved in the marketing/selling, inside employees, and

distribution channels will need to be trained about the new product. If the product is
sufficiently complex, face-to-face training needs to be provided. Or perhaps some
type of multimedia program will do the job. If the product is not that complex,
literature may work. Again, timing is critical. Train before the product hits the
shelves, not after.
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 Promotion
The promotional program to support the introduction: advertising, trade shows,

promotional literature, technical literature, samples, incentives, Web site, seminars,
public relations. Time it all with production, inventory, shipments, and training. The
new product will simply sit in the warehouse without the right support materials.
Research, timing, and planning can all help increase the probability of success.
2.6 KEY DRIVERS OF THE INDUSTRY
 Demand for complete new product type

 Demand for “green” or “clean” products
 First to market
 Compliance with regulation
 Low cost
 Pure Innovation
Demand for new product type is the most common idea of innovation. Consumers
want totally new products. This is means not only new packaging, nor changes in
existing formulas but new ideas and new concepts. FMCG companies launches many
new products each year considering new trends; 2014 was high in greek yogurts
naturally flavored products, whole grain trend, gluten-free obsession or coconut
mania. For manufacturers, this is the most demanding kind of innovation. It costs a lot
and ROI is not guaranteed. Marketing, R&D, quality, business and suppliers have to
collaborate efficiently to optimize the NPD process.
 Green or clean products
Greener or cleaner products are a fluctuating trend. Consumers are concerned by what
they eat and drink and cleaner products market place usually offer better margin than
standard food one. Origins, certifications, compliances with regulations etc. is a
growing part in NPD. Quality department is more involved than ever in production
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process. Having a tool providing documents and data attached to a specific product or
batch save time, energy and money while auditing or managing claims.
 Pressure to reduce time to market
In processed foods, innovation is important to increase growth and profits. Companies

are racing to be first to market. Being the first on a niche or the first providing a
product responding to customers’ needs is the best way to ensure high margin and
future leadership. Those getting later on the marketplace have to compete on a price-
base and suffer of poor returns on R&D investments. Innovation concerns not only the
product itself and its formulation but also packaging, certification, co-branding, etc.
Consequently reducing time to market involves formulation process, quality
compliance, marketing concerns, suppliers’ collaboration etc.
 Compliance with regulations
Companies must be able to effectively manage the risk attached to NPD. Risks are all
along the new product development process but certification compliance and quality
ones are the most important. Global and local regulations become tighter. The new
INCO regulations recently adopted in Europe goes far beyond simple packaging
changes. As, regulations apply to final products, semi-finished products and
ingredients, the final manufacturer is responsible for its suppliers’ products and
depends on the reliability of the product information he is been given.
 Low Cost
Having a tool assisting teams in NPD process is a good means to lower costs. Then,
margins can be higher and / or prices can be more attractive to consumers and
contribute to enhance market share.
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CHAPTER 3
REVIEW OF LITRATURE
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3.1 BRIEF THEORETICAL CONSTRUCT RELATED TO THE
PROBLEM
Financial statements are written records that convey the business activities and the financial
performance of a company. Financial statements include the balance sheet, income statement,
and cash flow statement. Financial statements are often audited by government agencies,
accountants, firms, etc. to ensure accuracy and for tax, financing, or investing purposes.
Investors and financial analysts rely on financial data to analyze the performance of a
company and make predictions about its future direction of the company's stock price. One of
the most important resources of reliable and audited financial data is the annual report, which
contains the firm's financial statements.
The financial statements are used by investors, market analysts, and creditors to evaluate a
company's financial health and earnings potential. The three major financial statement reports
are the balance sheet, income statement, and statement of cash flows.
The objective of income statements is to provide information about the financial position,
performance and changes in financial position of an enterprise that is useful to a wide range
of users in making economic decisions. Financial statements should be understandable,
relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses
are directly related to an organization’s financial position.
Financial statements are intended to be understandable by readers who have "a reasonable
knowledge of business and economic activities and accounting and who are willing to study
the information diligently." Financial statements may be used by users for different purposes:
 Owners and managers require financial statements to make important business
decisions that affect its continued operations. Financial analysis is then performed on
these statements to provide management with a more detailed understanding of
thefigures. These statements are also used as part of management's annual report to
the stockholders.
 Employees also need these reports in makingcollective bargaining agreements (CBA)
with the management, in the case of labour unions or for individuals in discussing
their compensation, promotion and rankings.
 Prospective investors make use of financial statements to assess the viability of
investing in a business. Financial analyses are often used by investors and are
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prepared by professionals (financial analysts), thus providing them with the basis for
making investment decisions.
 Financial institutions (banks and other lending companies) use them to decide
whether to grant a company with fresh working capital or extend debt securities (such
as a long termbank loan or debentures) to finance expansion and other significant
expenditures.
The main financial statements are:

 Balance sheet.
It is a statement showing to all the assets owned by the firm and represents all the liabilities
including the equities of owners and outsiders at a particular time.
 Profit and loss account.
It shows the summary of operations of a firm in a given period providing details of

revenue, cost and profit.
Objectives and importance of financial statement analysis

The primary objective of financial statement analysis is to undertake and diagnose the
information contained in the financial statement with a view to judge the profitability,
financial soundness of the firm and to make forecast about the future prospects about the
firm. The purpose of analysis depends upon the person interested in the analysis and his
objective. However the following purpose or objective of financial statement analysis may
state to bring out the significance of such analysis.
Objectives:
 To indulge the earning capacity of the business in terms of profitability in terms of
current period as well as future prospects.
 To judge the managerial efficiency and highlight the area of concern.
 To judge the short term and long term solvency position of the enterprise to maintain
their credit worthiness.
 To facilitate intern firm comparison i.e. assessing own performance with that of other
firms in the same industry.
 To facilitate making forecast, preparing budget and predict likely development of the
future.
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 To facilitate understanding of the complicated data provided in the financial
statements for both its internal and external users.
 To assess the overall financial position of the firm.to determine the debt capacity of
the firm.
 To assess the fluctuation in the share prices.
 To take capital investment decision.
 To evaluate accounts receivable and accounts payable management.
 To assess the inventory management strategies.
Limitations of Financial Analysis

Financial Statement Analysis is very important, but it has certain limitations which are to be
kept in mind. Following are the limitations of financial analysis.
 Financial statements are prepared according to certain conventions at a point of time,

whereas the investor is concerned with the present and future of the company.
 The results shown by financial statements may be misleading, if price level changes
have not been accounted for.
 Financial analysis does not measure the qualitative aspects of the firm e.g. skill,
technical know-how etc…
 Results shown by analysis may be misleading in the absence of absolute data.
 The accuracy and reliability of analysis depends on reliability of figures derived from
financial statements.
 Ratio analysis
Ratio analysis is an attempt of developing meaningful relationship between individual items

(or group of items) in the balance sheet or profit and loss account. Ratio analysis is not only
useful to internal parties of business concern but also useful to external parties. Ratio analysis
highlights the liquidity, solvency, profitability and capital gearing. The ratios are categorized
as
 Liquidity Ratio
 Leverage Ratio,
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 Turnover Ratio
 Profitability ratio
A.Liquidity Ratio
It measures the ability of the firm to meet its short-term obligations that is capacity of the
firm to pay its current liabilities as and when they fall due. Thus these ratios reflect the short-
term financial solvency of a firm. A firm should ensure that it does not suffer from lack of
liquidity. The failure to meet obligations on due time may result in bad credit image, loss of
creditors confidence, and even in legal proceedings against the firm on the other hand very
high degree of liquidity is also not desirable since it would imply that funds are idle and earn
nothing. So therefore it is necessary to strike a proper balance between liquidity and lack of
liquidity. The various ratios that explain about the liquidity of the firm are;
 Current Ratio
 Acid Test Ratio / quick ratio
 Absolute liquid ratio / cash ratio
1. Current Ratio
The current ratio measures the short-term solvency of the firm. It establishes the relationship
between current assets and current liabilities. It is calculated by dividing current assets by
current liabilities.
Current Ratio = Current Asset/Current Liabilities
Current assets include cash and bank balances, marketable securities, inventory, and debtors,
excluding provisions for bad debts and doubtful debtors, bills receivables and prepaid
expenses. Current liabilities includes sundry creditors, bills payable, short- term loans,
income tax liability, accrued expenses and dividends payable.
Advantages of Current Ratio:

 It measures the liquidity of the firm
 It represents the working capital position of a firm
 It represents the liquidity of a company
 It represents margin of safety
 Its tells us the short term solvency of a firm.
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Disadvantages of Current Ratio:
 Its accuracy can be deterred as, pertaining to different businesses,
depending on a variant of factors
 Over-valuation of stock also contributes to its tipping accuracy
 It measures the firm liquidity on the basis of quantity and not quality, which
comes across as a crude method.
2. Acid Test Ratio / Quick Ratio

It has been an important indicator of the firm’s liquidity position and is used as a
complementary ratio to the current ratio. It establishes the relationship between quick assets
and current liabilities. It is calculated by dividing quick assets by the current liabilities.
Acid Test Ratio = Quick Assets/Current liabilities
Quick assets are those current assets, which can be converted into cash immediately or within
reasonable short time without a loss of value. These include cash and bank balances, sundry
debtors, bill’s receivables and short-term marketable securities. The ideal Quick Ratio is 1: 1
andis considered to be appropriate. High Acid Test Ratio is an accurate indication that the
firm has relatively better financial position and adequacy to meet its current obligation in
time.
Advantages of Quick Ratio:
 It tells us the liquidity position of a firm
 It is used to remove the errors of current ratio
 It is used as supplementary to the current ratio
3. Absolute Liquid Ratio / Cash Ratio

It shows the relationship between absolute liquid or super quick current assets and liabilities.
Absolute liquid assets include cash, bank balances, and marketable securities. The most
favourable and optimum value for this ratio should be 1: 2. It indicates the adequacy of the
50% worth absolute liquid assets to pay the 100% worth current liabilities in time. If the ratio
is relatively lower than one, it represents the company’s day-to-day cash management in a
poor light. If the ratio is considerably more than one, the absolute liquid ratio represents
enough funds in the form of cash in order to meet its short-term obligations in time.
Absolute liquid ratio = Absolute liquid assets/Current liabilities.
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B. Leverage Ratio
The solvency or leverage ratios throws light on the long term solvency of a firm reflecting its
ability to assure the long term creditors with regard to periodic payment of interest during the
period and loan repayment of principal on maturity or in predetermined installments at due
dates. There are thus two aspects of the long-term solvency of a firm.
 Ability to repay the principal amount when due.
 Regular payment of the interest.
The ratio is based on the relationship between borrowed funds and owner’s capital it is
computed from the balance sheet, the second types are calculated from the profit and loss a/c.
The various solvency ratios are;
 Debt equity ratio
 Debt to total capital ratio
 Proprietary (Equity) ratio
 Fixed assets to net worth ratio.
1. Debt Equity Ratio

Debt equity ratio shows the relative claims of creditors (Outsiders) and owners (Interest)
against the assets of the firm. Thus this ratio indicates the relative proportions of debt and
equity in financing the firm’s assets. It can be calculated by dividing outsider funds (Debt)
by shareholder funds (Equity)
Debt equity ratio = Outsider Funds (Total Debts)/Shareholder Funds or Equity
The outsider fund includes long-term debts as well as current liabilities. The shareholder
funds include equity share capital, preference share capital, reserves and surplus including
accumulated profits. However fictitious assets like accumulated deferred expenses etc.
should be deducted from the total of these items to shareholder funds. The shareholder funds
so calculated are known as net worth of the business.
2. Proprietary (Equity) Ratio
This ratio indicates the proportion of total assets financed by owners. It is calculated by
dividing proprietor (Shareholder) funds by total assets.
Proprietary (equity) ratio = Shareholder funds/Total assets
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This ratio shows the financial strength of the company. It helps the creditors to find out the
proportion of shareholders fund in the total assets. Higher ratio indicates a secured position to
creditors and a low ratio indicates greater risk to creditors. It indicates the long term solvency
of the firm.
3. Fixed Assets to Net Worth Ratio
This ratio establishes the relationship between fixed assets and shareholder funds. It is
calculated by dividing fixed assets by shareholder funds.
Fixed assets to net worth ratio = Fixed Assets / Net Worth *100
The shareholder funds include equity share capital, preference share capital, reserves and
surplus including accumulated profits. However fictitious assets like accumulated deferred
expenses etc.
should be deducted from the total of these items to shareholder funds. The shareholder funds
so calculated are known as net worth of the business.
4. Fixed Assets to Long Term Funds Ratio

Fixed assets to long term funds ratio establishes the relationship between fixed assets and
long term funds and is calculated by dividing fixed assets by long term funds.
Fixed assets to long term funds ratio = Fixed Assets /Long-term Funds*100
C. Turnover Ratio
The relationship between assets and sales is known as assets turnover ratio. Several assets
turnover ratios can be calculated depending upon the groups of assets, which are related to
sales.
 Total asset turnover.
 Net asset turnover
 Fixed asset turnover
 Current asset turnover
 Net working capital turnover ratio
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1. Total Asset Turnover
This ratio shows the firm’s ability to generate sales from all financial resources committed to
total assets. It is calculated by dividing sales by total assets.
Total asset turnover = Total Sales/Total Assets
2. Net Asset Turnover
This is calculated by dividing sales by net assets.Net assets represent total assets minus
current liabilities. Intangible and fictitious assets like goodwill, patents, accumulated losses,
deferred expenditure may be excluded for calculating the net asset turnover.
Net asset turnover = Total Sales/Net Assets
3.Fixed Asset Turnover
The ratio indicates the extent to which the investments in fixed assets contribute towards the
sales. If compared with the previous year it indicates that, whether the investment in the fixed
assets has been judicious or not
Fixed asset turnover = Total Sales/Net Fixed Assets
Current Asset Turnover

The sales to current asset ratio is best measured over several periods and needs to be
compared to industry averages as the amount of current asset widely among industries. It is
divided by calculating sales by current assets
Current asset turnover = Total Sales/Current Assets
D. Profitability Ratio
The profitability ratio of the firm can be measured by calculating various profitability ratios.
General two groups of profitability ratios are calculated.
a. Profitability in relation to sales. (General profitability ratios)
b. Profitability in relation to investments. (Overall profitability ratios) Profitability in return

on sales;
1. Gross profit margin or ratio
2. Net profit margin or ratio
3. Operating profit margin or ratio
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1. Gross Profit Margin or Ratio
It measures the relationship between gross profit and sales. It is calculated by dividing gross
profit by sales. Gross profit is the difference between sales and cost of goods sold.
Gross profit margin or ratio = Gross profit /Net sales *100
2. Net Profit Margin or Ratio
It measures the relationship between net profit and sales of a firm. It indicates management’s
efficiency in manufacturing, administrating, and selling the products. It is calculated by
dividing net profit after tax by sales.
Net profit margin or ratio = Earnings after tax /Net Sales *100
3. Operating Profit Margin or Ratio
It establishes the relationship between total operating expenses and net sales. It is calculated
by dividing operating expenses by the net sales. Operating expenses includes cost of goods
produced/sold, general and administrative expenses, selling and distributive expenses.
Operating profit margin or ratio = Operating expenses /Net sales *100
Profitability in relation to Investment;

1. Return on gross investment or gross capital employed
2. Return on net investment or net capital employed
3. Return on shareholder’s investment or shareholder’s capital employed.
1. Return on Gross Investment

This ratio establishes the relationship between net profit and the gross capital employed. The
term gross capital employed refers to the total investment made in business. The
conventional approach is to divide Earnings After Tax (EAT) by gross capital employed.
Return on gross capital employed = Earnings After Tax (EAT) /Gross capital employed
*100
2. Return on Capital Employed
It is calculated by dividing Earnings before Interest & Tax (EBIT) by the net capital
employed. The term net capital employed is the gross capital in the business minus current
liabilities.
Thus it represents the long-term funds supplied by creditors and owners of the firm.
Return on net capital employed = Earnings before Interest & Tax (EBIT) /Net capital
Employed*100
36
3. Return on Share Capital Employed
This ratio establishes the relationship between earnings after taxes and the shareholder
investment in the business. This ratio reveals how profitability the owners’ funds have been
utilized by the firm. It is calculated by dividing Earnings after tax (EAT) by shareholder
capital employed.
Return on share capital employed = Earnings after tax (EAT) /Shareholder capital
employed *100
9. Cost Volume Profit Analysis
This analysis discloses the prevailing relationship among sales, cost and profit. The cost is
divided into two. They are fixed cost and variable cost. There is a constant relationship
between sales and variable cost. Cost analysis enables the management for better profit
planning.
3.2 AN OVERVIEW OF EARLIER STUDIES
This chapter deals with the conclusion of studies already conducted and the theoretical
perspectives based on the study. A literature review is a critical and in-depth evaluation of
previous research. It is a summary and synopsis of a particular area of research. A literature
review discusses published information in a particular subject area. Literature review can be
just a simple summary of the sources, but it usually has an organizational pattern and
combines both summary and synthesis.
Taylor, R k (2006)1in his studymentions that financial statements as the aid towards financial
analysis. He indicates that the financial statements helps the business organization in having
some extremely useful information in the form of balance sheet which mirrors the financial
position on a particular date in terms of the structure of assets, liabilities and owner’s equity
and the profit and loss account which shows the results of operations during a certain period
of time, in terms of the revenue obtained and the cost incurred during the year. Thus the
financial statements provide a summarized view of the financial position and operations of a
firm.
S. Sreedharna (2010)2 mentions about the importance of ratio analysis which helps in the
analysis of the financial performance of the company. He indicates that the situation of the
37
two companies is not the same. Similarly, the factors influencing the performance of the
company in one year may change in another year. It is also helpful in analyzing the profit of
the company which enables the company’s survival and growth over a long period of time.
Therefore, the analysis of the ratio is very much important in-order to assess and examine the
financial performance of the company.
A K Phophalia, Saritha Sbarma and G R Basotia(2008)3 indicates that ratio analysis is

the process of determining and presenting the relationship of the items in financial
statements. It is the numerical relationship between two items of financial statements. He also
points out that the advantage of working with ratio analysis is that, it enables the organization
to properly judge the performance and financial position of the enterprise which
automatically helps the organization in their decision making process, dragonizing the
organizations financial ills and studies about the financial trends that is happening in the
organization.
Lina Warrad and Dr. Rania Al Omari(2015)4 studies about the impact of the activity ratios
on the financial performance analysis. He tells that most professional analysts and investors
tend to focus on return on asset (ROA) as their primary measure of firm performance. He also
indicates that ROA is a better metric of financial performance than income statement
profitability measures like return on sales (ROS). Return on asset explicitly takes into account
the assets used to support business activities. It determines whether the company is able to
generate an adequate profit on its assets rather than simply showing return on sales (ROS).
N. Gupta (2006)5 states that financial statements provide a summary of the accounts of a
business enterprise, the balance sheet reflecting the assets and liabilities and the income
statement showing the result of operations during a certain period. He mentions that the
financial statement analysis emphasize more importance to balance sheet and profit and loss
account but ignores the importance of other financial statements like cash flow statement,
fund flow statement and also retained earnings.
Lambrix and Singhvi (2000)6 states that ratio analysis is a widely used tool for financial
performance analysis. He tells that ratio analysis is a major tool in order to interpret financial
statements so that strengths and weaknesses of the firm. He also mentions that ratios are
38
relative figures reflecting the relationship between related variables.
Robu Sorin-Adrian (2013)7 in their journal describes about the importance of accounting for
business enterprise. They mention that the main concerns in all business areas have been and
still remain the continuous growth in performance. Business field is not accepted, for which
reason, over time, it has developed its own models and techniques to ensure the achievement
of their organizational goals. The authors points out that, for the successful running of the
enterprise, continuous performance, for taking timely accurate decisions, to ensure solvency
of the business enterprise and also for having a sound financial structure, the business
enterprise needs information which are provided by accounting, mainly through the Profit
and Loss account and Balance sheet which justifies the "pivot" role of accounting in the
improvement of business performance.
Jha Suvita, Hui Xiaofeng (2012)8 mentions that to analyze the financial performance of
different ownership structured commercial banks in Nepal based on their financial
characteristics and identify the determinants of performance of the banks with the help of
financial ratios. The performance evaluation of banks is important for all parties including
depositors, investors, bank managers and regulators. The evaluation of a firm’s performance
usually employs the financial ratio method, because it provides a simple description about the
firm’s financial performance in comparison with previous periods and helps to improve its
performance of management. The study reveals the result that the public sector banks were
significantly less efficient when compared to their counterpart private banks mainly because
of the funds available and also the customer dealings by the public sector banks.
Choudhary Himanshu, Tripathi Gaurav(2012)9 states that to assess the operational

efficiency of the companies in the Indian organized retail industry in terms of inventory
turnover and also to investigate the impact of inventory turnover on financial performance. A
thorough analysis of the inventory management practices adopted at these companies
suggests that each retailer plans its inventory level keeping in view its positioning in minds of
its customers and, of course, the sales forecasting. The inventory level is based on forecasting
which plays a crucial role in the performance of the company.
39
3.3 UNIQUENESS OF RESEARCH STUDY
 Data collected from reliable sources.

 It is process of identifying the financial strength and weakness of Nestle India
Limited from the available accounting data and financial statement.
 The tools were used for analysis are updated as well as have advanced
techniques.
 Research study is completely based on secondary data.
40
CHAPTER 4
METHODOLOGY OF THE STUDY
41
4.1 RESEARCH APPROCH & DESIGN
The project work is entirely based on the secondary data. The secondary data is made
available from the financial statements and other related documents of Nestle India ltd . The
collected data are processed in terms 0f Specified Objectives. An attempt is made to establish
inter-relation between chosen variables.
4.2 SOURCES OF ONLINE DATA
The data collection for the study is mainly from the secondary sources. Like
 Online reports
 Books
 Journal
 Web sites
4.3 DATA ANALYSIS TOOLS
Analysis means a critical examination of assembles and grouped data among the variables
relating to the object under the study and for determine the pattern of relationships among the
variables relating to it.
 Ratio analysis
 Trend analysis
 Comparative analysis
4.4 REPORT STRACTURE

Chapter 1: Introduction
Chapter 2: Industry Profile
Chapter 3: Review of Literature
Chapter 4: Methodology of the study
Chapter 5: Data Analysis, Interpretation & Inference
Chapter 6: Findings of the study
Chapter 7: Conclusions
42
4.5 LIMITATIONS OF THE STUDY
The study was conducted with the following limitations;

 As the study was mainly based on secondary information, the inherent limitations of
the secondary data might have affected the findings of the study.
 The analysis is based on the financial information from Money control website.
 Accuracy of the result depends upon the accuracy of secondary data.
The observation and analysis made in this study are relevant for the reference period only, no
generalization can be made
43
CHAPTER 5
DATA ANALYSIS, INTERPRETATION& INFERENCE
44
A) Liquidity ratios:
It measures the ability of the firm to meet its short-term obligations that is capacity of the
firm to pay its current liabilities as and when they fall due. Thus these ratios reflect the short-
term financial solvency of a firm
i. Current ratio:
The current ratio is a liquidity ratio that measures a company's ability to pay short-term
obligations or those due within one year. It tells investors and analysts how a company can
maximize the current assets on its balance sheet to satisfy its current debt and other payables.
TABLE 5.1
CURRENT RATIO
Year Current Asset Current Liabilities Ratio
2015-2016 2479.61 1475.73 1.68
2016-2017 3278.99 1632.70 2.00
2017-2018 3937.39 1492.71 2.63
2018-2019 4736.95 1854.95 2.55
2019-2020 3817.17 2147.51 1.77
2.126
Average
45
Interpretation and Analysis:
The above table shows that the current ratio in the year 2015-16 was 1.68 and then it
increases to 2.00 and 2.63 in the year 2016-17 to 2017-2018, further move downwards to
2.55 in the year 2017-2018 and finally in the year 2019-2020 it slashed down to 1.77
The normal current ratio is 2:1. The average ratio of the company 2.126 is satisfactory
ii Acid Test Ratio / Quick Ratio

This ratio is also known as liquid ratio. This ratio is the best measure of the liquidity in the
company. This ratio is more conservative than the current ratio. The quick asset is computed
by adjusting current assets to eliminate those assets which are not in cash. Generally 1:1 is
treated as an ideal ratio.
Acid test ratio/Quick ratio = Quick asset

------------------------
Current liabilities
TABLE 5.2
ACIDE TEST RATIO
Year Quick Asset Current Liabilities Ratio
2015-2016 1658.8 1475.73 1.12
2016-2017 2335.81 1632.70 1.43
46
2017-2018 3034.92 1492.71 2.03
2018-2019 3771.4 1854.95 2.03
2019-2020 2534.1 2147.51 1.18
Average 1.558

Quick ratio indicates whether the firm is in a position to pay its current liabilities within a
month of immediately. The standard ratio is 1:1 and here the ratios are 1.12,1.43,2.03,2.03,
and 1.18. We can conclude that the firm has in a position to meet its current liabilities within
a month and the average ratio of the company is( 1.558) .
iii) Absolute liquidity ratio

The relationship between the absolute liquid assets and current liabilities is established by
this ratio. Absolute Liquid Assets take into account cash in hand, cash at bank, and
marketable securities or temporary investments.
Absolute Liquid assets= Cash+ bank+ marketable securities

Absolute liquid ratio = Absolute liquid assets
----------------------------------------
Current liabilities
47
TABLE 5.3
ABSOLUTE LIQUIDITY RATIO
Year Cash and bank Current Liabilities Ratio
2015-2016 1482.69 1475.73 1.00
2016-2017 2155.04 1632.70 1.31
2017-2018 2851.01 1492.71 1.90
2018-2019 3535.19 1854.95 1.90
2019-2020 2315.5 2147.51 1.07
Average 1.436
The acceptable norm for this ratio is 1:2 to attain liquidity position. In Nestle India ltd
liquidity ratio Is increases from 2015-2019 ,decreases in the year 2019-20 and the average
ratio of the company is 1.436 when the ratios are less than the recommended level, the
company may fails to manage day to day cash management progression.
A) Leverage ratio
i. Debt equity ratio

The debt-to-equity (D/E) ratio is calculated by dividing a company’s total liabilities by its
shareholder equity. These numbers are available on the balance sheet of a company’s
financial statements. The D/E ratio is an important metric used in corporate finance. It is a
48
measure of the degree to which a company is financing its operations through debt versus
wholly owned funds.
TABLE 5.4
DEBT EQUITYRATIO
Year Outsiders fund Proprietors fund Ratio
2015-2016 1786.89 2817.84 0.63
2016-2017 2159.57 3013.70 0.71
2017-2018 2449.29 3420.59 0.71
2018-2019 2559.39 3673.74 0.69
2019-20120 2978.43 1932.26 1.54
Average 0.856
Debt equity ratio = Outsider’s fund

---------------------
Proprietor’s fund
49
The ratio measures the relationship between debt and equity. An acceptable norm for this
ratio is considered to be 2:1. A high ratio shows that the claims of creditors are greater those
of owners. A very high ratio is unfavourable from the point of view of the firm. A low debt
equity ratio is implies a greater claim of owners than creditors. Here the ratios and
0.63,0.71,0.71,0.69,1.54 respectively for the year 2016,2017,2018,2019,2020 and the average
ratio of the company is 0.856. Hence we can conclude that long term solvency position of the
firm is good.
ii. Proprietary ratio
This ratio shows the proportion of total assets of a company which are financed by
proprietors’ funds. The proprietary ratio is also known as equity ratio. It helps to determine
the financial strength of a company & is useful for creditors to assess the ratio of
shareholders’ funds employed out of total assets of the company.
Proprietary ratio = Proprietor’s fund

---------------------------
Total tangible asset
TABLE 5.5
PROPRIETARY RATIO
Year Proprietors fund Total Tangible Asset Ratio
2015-2016 2817.84 6080.46 0.46
2016-2017 3013.70 6805.97 0.44
2017-2018 3420.59 7362.59 0.46
50
2018-2019 3673.74 8088.08 0.45
2019-2020 1932.26 7058.20 0.27
Average 0.416
The proprietary ratio is computed for the purpose of knowing how much funds have been
provided by the shareholder towards the total asset. A high ratio indicates safety to the
creditors and low ratio shows greater risk to the creditors. The standard ratio is 1:3. Here the
ratios are 0.46,0.44,0.46,0.45, and 0.27 respectively for the years 2015-16 to 2019-20 and the
average ratio of the company is 0.416 Here we can conclude that the company has no
favourable solvency position.
i. Fixed asset to net worth ratio

Fixed assets to net worth is a ratio measuring the solvency of a company .This ratio indicates
the extent to which the owners' cash is frozen in the form of fixed assets, such as property,
plant, and equipment, and the extent to which funds are available for the company's
operations (i.e. for working capital
Fixed asset to net worth ratio = Fixed asset

---------------------
Shareholder’s fund
51
TABLE 5.6
FIXED ASSET TO NETWORTH RATIO
Year Fixed Asset Shareholders fund Ratio
2015-2016 3128.64 2817.84 1.11
2016-2017 2917.63 3013.70 0.96
2017-2018 2710.34 3420.59 0.79
2018-2019 2505.82 3673.74 0.68
2019-2020 2370.01 1932.26 1.22
Average 0.952
If the ratio is greater than one, it means that creditors fund have been used to acquire a part of
fixed asset. Here the ratios are more than one, and the average ratio of the company is 1.87
hence we can conclude that company does not need to use creditors fund for acquiring fixed
asset.
C. Turnover ratio
i .Fixed asset turnover ratio

The fixed asset turnover ratio (FAT) is, in general, used by analysts to measure operating
performance. This efficiency ratio compares net sales (income statement) to fixed assets
(balance sheet) and measures a company's ability to generate net sales from its fixed-asset
investments, namely property, plant, and equipment
Fixed asset turnover ratio = Net sales

----------------------
Fixed asset
52
TABLE 5.7
FIXED ASSETTURN OVER RATIO
Year Net Sales Fixed Asset Ratio
2015-2016 8123.27 3128.64 2.59
2016-2017 9159.28 2917.63 3.13
2017-2018 9952.53 2710.34 3.67
2018-2019 11216.23 2505.82 4.47
2019-2020 12295.27 2370.01 5.18
Average 3.808
Fixed assets are used in the business for producing goods to be sold. The effective utilization
of fixed asset will result in increased production and reduced cost. and the average ratio of
the company is 3.808 The effective utilization of fixed asset shows a lower ratio in the year
2015. But the ratio is increasing in the last years. This indicates the better utilization of fixed
asset.
ii. Capital Turnover Ratio
This is a ratio which shows how much sales are entertained from the capital. It shows how the
sales are attracted from the Proprietor's Fund.
53
Sales
Capital turnover ratio = -----------------------
Proprietor’s fund
TABLE 5.8
CAPITAL TURNOVER RATIO
Year Net sales Proprietors fund Ratio
2015-2016 8123.27 2817.84 2.88
2016-2017 9159.28 3013.70 3.03
2017-2018 9952.53 3420.59 2.90
2018-2019 11216.23 3673.74 3.05
2019-2020 12295.27 1932.26 6.36
Average 3.644

The above table diagram shows the relationship between the sales and proprietors funds. In
the year 2014-15 the ratio 2.88 and then it was fluctuated 3.03, 2.90 and 3.05 in the year
2015-16 to 2017-2018 and in the final year i.e. 2018-19 it reached the highest to 6.36 and the
average ratio of the company is 3.644 It shows the firms is maintaining the better utilization
of own funds.
iii. Working capital turnover ratio
Working capital turnover is a ratio that measures how efficiently a company is using its
working capital to support a given level of sales. Also referred to as net sales to working
54
capital, work capital turnover shows the relationship between the funds used to finance a
company's operations and the revenues a company generates as a result.
Working capital turnover ratio = Net sales

-----------------------
Working capital
TABLE 5.9
WORKING CAPITAL TURNOVER RATIO
Year Net Sales Working capital Ratio
2015-2016 8123.27 1003.88 8.09
2016-2017 9159.28 1646.29 5.56
2017-2018 9952.53 2444.68 4.07
2018-2019 11216.23 2882 3.89
2019-2020 12295.27 1669.66 7.36
Average 5.794

Fluctuation in the working capital due to the variation of net working capital shows that the
need of consistent working capital management policy.
D. Profitability ratios:
Profitability ratios are a class of financial metrics that are used to assess a business's ability to
generate earnings relative to its revenue, operating costs, balance sheet assets, and
55
shareholders' equity over time, using data from a specific point in time. Profitability ratios
consist of a group of metrics that assess a company's ability to generate revenue relative to its
revenue, operating costs, balance sheet assets, and shareholders' equity.
i. Gross profit ratio
Gross profit ratio (GP ratio) is a profitability ratio that shows the relationship between gross
profit and total net sales revenue. It is a popular tool to evaluate the operational performance
of the business. The ratio is computed by dividing the gross profit figure by net sales.
Gross profit ratio = Gross profit

------------------- *100
Net sales
TABLE 5.10
GROSS PROFIT RATIO
Year Gross profit Net sales Ratio
2015-2016 8175.31 8123.27 100.64
2016-2017 9223.80 9159.28 100.70
2017-2018 10009.60 9952.53 100.57
2018-2019 11292.27 11216.23 100.67
2019-2020 12368.90 12295.27 100.59
Average 100.634
*here Gross profit should be considered as a total operating revenue.
56
The above table shows the relationship between the gross profit and net sales in percentage.
During 2015-16 the gross profit position was 100.64 and in the very next four years it
fluctuated to 100.70,100.57,100.67,100.59.and the average ratio is 100.634
ii. Net profit ratio

Net profit ratio (NP ratio) is a popular profitability ratio that shows relationship between net
profit after tax and net sales. It is computed by dividing the net profit (after tax) by net sales.
Net profit ratio = Net profit

-------------------- *100
Net sales
TABLE 5.11
NET PROFIT RATIO
Year Net profit Net sales Ratio
2015-2016 813.63 8123.27 10.01
2016-2017 1441.54 9159.28 15.73
2017-2018 1839.30 9952.53 18.48
2018-2019 2428.95 11216.23 21.65
2019-2020 2671.99 12295.27 21.73
Average 17.52
57
** Here net profit should be consider as a profit before tax
This ratio is used to measure the overall profitability and hence it is very useful to
proprietors. Here the profitability of the firm follows an increasing trend. This trend indicate
the effective cost management and sales promotion
TREND ANALYSIS
The table showing the trend for NET PROFIT from 2014-15 to 2018-19
TABLE 5.12
NET PROFIT
Year X Y XY X2
2014-2015 1 813.63 813.63 1
2015-2016 2 1441.54 2883.08 4
2016-2017 3 1839.30 5517.9 9
2017-2018 4 2428.95 9715.8 16
2018-2019 5 2671.99 13359.95 25
Total 15 9195.41 32290.36 55
58
FIGURE 5.1
NET PROFIT FROM 2015-16 TO 2019-20
NET PROFIT
14000
12000
10000
8000
6000
4000
2000
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
59
TABLE 5.13
Estimated profit for 2020-2021 to 2024-25
Year Profit
2020-2021 3250.321
2021-2022 3720.734
2022-2023 4191.147
2023-2024 4661.56
2024-2025 5131.973
60
FIGURE 5.2
ESTIMATED PROFIT FOR 2020-2021 TO 2024-2025
ESTIMATED PROFIT
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
2020-2021 2021-2022 2022-2023 2023-2024 2024-2025
On the basis of last 5 years profit position we can predict the profit trend for the future
years. Here this trend shows positive growth for the future period
61
The table showing the trend for NET SALES from 2015-16 to 2019-20
TABLE 5.14
NET SALES
Year X Y XY X2
2015-2016 1 8123.27 8123.27 1
2016-2017 2 9159.28 18318.56 4
2017-2018 3 9952.53 29857.59 9
2018-201 4 11216.23 44864.92 16
201[9-2020 5 12295.27 61476.35 25
Total 15 50746.58 162640.69 55
62
FIGURE 5.3
NET SALES from 2015-16 to 2019 -20
NET SALES
14000
12000
10000
8000
6000
4000
2000
0
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
63
TABLE 5.15
Estimated sales for 2020-2021 to 2024-25
Year Sales
2020-2021 13269.601
2021-2022 14309.696
2022-2023 15349.791
2023-2024 16389.886
2024-2025 17429.981
64
FIGURE 5.4
Estimated sales for 2020-2021 to 2024-25
ESTIMATED SALES
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
2020-2021 2021-2022 2022-2023 2023-2024 2024-2025
Interpretation and analysis
Future trend of the sales showing a positive trend. It indicates that the consumers are need the
product and the company can survive by reducing cost of production and quality products.
65
COMPARATIVE STATEMENT ANALYSIS
TABLE 5.16
Comparative balance sheet of NESTLE INDIA LTD for the year 2015&2016
Particulars 2015 201 Inc/Dec % of

changes
Equity and liabilities
Share capital 96.42 96.42 0 0

Reserves and surplus 2,740.79 2721.42 -19.37 -0.706
Non- current liabilities

Long term borrowing 15.46 16.79 1.33 8.602
Deferred tax liabilities 222.72 172.93 -49.79 -22.355
Other Longterm liabilities --------- ----------- ----------- ---------
Long term provision 1388.66 1597.17 208.51 15.01
Current liabilities
Short term borrowing 4.11 0.94 -3.17 -77.12
Trade payable 728.71 743.54 14.83 2.035
Other current liabilities 409.57 465.93 56.36 13.76
Short term provision 213.06 265.32 52.26 24.528
Total 5819.5 6080.46 260.96 4.484

Assets
Non- current asset
Fixed asset 3421.42 3128.64 -292.78 -8.557
Non- current investment 304.46 341.78 37.32 12.257
Long term loans and advances 129.95 130.43 0.48 0.369
Other non- current asset --------- -------- --------- --------
Current asset
Current investment 507.36 983.14 475.78 93.77
Inventories 844.10 820.81 -23.29 -2.759
Trade receivable 99.10 78.42 -20.68 -20.86
Cash and cash equivalents 445.82 499.55 53.73 12.05
Short term loans and advances 52.07 82.97 30.9 59.34
Other current asset 15.22 14.72 -0.5 -3.285
Total 5819.5 6080.46 260.96 4.484
66
TABLE 5.17
Comparative balance sheet of NESTL EINDIA LTD for the year 2016&2017

changes

Reserves and surplus 2721.42 2917.28 195.86 7.196

Other long term liabilities --------
Current liabilities
Short term borrowing 0.94 0 -0.94 -100
Trade payable 743.54 799.16 55.62 7.480
Total 6080.46 6805.97 725.51 11.931

Assets
Non- current asset
Fixed asset 3182.64 2917.63 -265.01 -8.326
Other non- current asset --------- --------
Current asset
Inventories 820.81 943.18 122.37 14.90
Trade receivable 78.42 97.93 19.51 24.878
Short term loans and advances 82.97 57.02 -25.95 -31.27
Other current asset 14.72 25.82 11.1 75.40
Total 6080.46 6805.97 725.51 11.931
67
TABLE 5.18

changes


Other longterm liabilities 0 0.60 0.60 0
Current liabilities
Short term borrowing ------ --------
Trade payable 799.16 984.64 185.48 23.20
Other current liabilities 512.84 420.61 -92.23 -17.98
Short term provision 320.70 87.46 -233.24 -72.72
Total 6805.97 7362.59 556.62 8.178

Assets
Non- current asset
Fixed asset 2917.63 2710.34 -207.29 -7.104
Long term loans and advances 135.04 46.35 -88.69 -65.67
Other non- current asset -------- 83.23
Current asset
Inventories 943.18 902.47 -40.71 -4.316
Total 6805.97 7362.59 556.62 8.178
68
TABLE 5.19

changes


Long term borrowing 35.14 35.14 0 0
Other long term liabilities 0.60 0.51 -0.09 -15
Current liabilities
Short term borrowing ------- --------
Trade payable 984.64 1240.37 255.73 25.971
Total 7362.59 8088.08 725.49 9.853

Assets
Non- current asset
Fixed asset 2710.34 2505.82 -204.52 -7.545
Long term loans and advances 46.35 40.14 -6.21 -13.39
Other non- current asset 83.23 71.81 -11.42 -13.72
Current asset
Inventories 902.47 965.55 63.08 6.989
Trade receivable 88.97 124.59 35.62 40.03
Total 7362.59 8088.08 725.49 9.853
69
TABLE 5.20

changes

Reserves and surplus 3577.32 1835.84 -1741.48 -48.68

Long term borrowing 35.14 53.14 18 51.22
Other long term liabilities 0.51 0.43 -0.08 -15.68
Current liabilities
Short term borrowing ----- --------
Trade payable 1240.37 1494.69 254.32 20.50
Short term provision 157.26 85.46 -71.8 -45.65
Total 8088.08 7058.2 -1029.88 -12.73

Assets
Non- current asset
Fixed asset 2505.82 2370.01 -135.81 -5.419
Other non- current asset 71.81 80.44 8.63 12.01
Current asset
Current investment 1925.13 1007.45 -917.68 -47.66
Inventories 965.55 1283.07 317.52 32.88
Cash and cash equivalents 1610.06 1308.05 -302.01 -18.75
Other current asset 93.73 81.81 -11.92 -12.71
Total 8088.08 7058.2 -1029.88 -12.73
70
CHAPTER -6
FINDINGS OF THE STUDY
71
FINDINGS
 The normal current ratio is 2:1. The average ratio of the company is 2.126 and it
shows company’s ability to pay short term obligations or those due within one year is
satisfactory
 The firm has in a position to meet its current liabilities within a month
 The absolute liquidity ratio fluctuates every year and the average ratio of the
company is 1.436. So the company may fail to manage day to day cash management
progression
 The long term solvency position of the firm is good
 The company has no favourable solvency position
 Fixed asset ratio increases every year. So this indicates the better utilization of fixed
asset
 The firm maintaining better utilization of own funds
 Fluctuations in the working capital due to the variation of net working capital shows
the need of consistent working capital management policy
 Gross profit ratio fluctuates every year .So the firm needs better operations
management
 The firm has effective cost management and sales promotion
 On the basis of last 5 years profit position we can predict the profit trend for the
future years. Trend shows positive growth for the future period
 Future trend of the sales showing a positive trend. It indicates that the consumers are
need the product and the company can survive by reducing cost of production and
quality products.
72
CHAPTER -7
CONCLUSION
73
CONCLUSION
Financial statement plays a very important role in providing facts and figures for the decision
makers. The study was conducted in Nestle India Limited. It is one of the FMCG
manufacturers in India. The company is engaged in manufacturing of foods and beverages.
They sells Their products under the brand name ‘Nestle’. It was incorporated in 28th March
1959. The main objective of the study was to analyze the financial performance of the
company Financial analysis determines a company’s health and stability , providing an
understanding of how the company conducts its business. From the analysis it was clear that
the overall performance of the company is satisfactory. The company is able to pay short
term obligations or those due within one year is satisfactory The long term solvency position
of the firm is good. Trend shows positive growth for the future period.Today’s efficiency of
the company shows future prospirity for the company.
74
BIBLIOGRAPHY
 Chandra Bose D, “Financial Management”, Divya Publications, Kollam,
 2017Kothari C R "Research Methodology: Methods & Techniques" (Second Revised
Edition), New Age International Publishers, New Delhi, 2009
 2017Kothari C R "Research Methodology: Methods & Techniques" (Second Revised
Edition), New Age International Publishers, New Delhi, 2009
WEBSITES
www.nestle.in
www.slideshare.com
75
ANNEXURES
NET PROFIT ESTIMATION
Y= a+bX
Where,
b= N∑XY - ∑X∑Y
_________________
N∑X2 -∑(X)2
= 5*32290.36-15*9195.41
_______________________
5*55 – (15*15)
=161451.8–137931.15
___________________
275 – 225
= 23520.65
__________
50
b= 470.413
a= ∑Y - b (
∑X)
= 9195.41–470.413*15
____________________
5
= 9195.41– 7056.195
__________________
5
= 2139.215
_________
5
a = 427.843
76
Profit for the year 2020-2021 to 2024- 2025
Y= a+bX
 2020- 2021
Y= 427.843+470.413*6
= 427.843+ 2822.478
= 3250.321
 2021- 2022
Y= 427.843+470.413*7
= 427.843+ 3292.891
= 3720.734
 2022- 2023
Y= 427.843+470.413*8
= 427.843+3763.304
= 4191.147
 2023- 2024
Y= 427.843+470.413*9
= 427.843+4233.717
= 4661.56
 2024- 2025
Y= 427.843+470.413*10
= 427.843+4704.13
= 5131.973
77
ESTIMATION OF NET SALES
Y= a+bX
Where,
b= N∑XY - ∑X∑Y N
_________________
∑X2 -∑(X)2
= 5*162640.69-15*50746.58
_______________________
5*55 –(15*15)
=813203.45– 761198.7
___________________
275 – 225
b= 52004.75
__________
50
= 1040.095
a= ∑Y - b (
∑X)
=50746.58–1040.095*15
____________________
5
=50746.58– 15601.425
_____________________
5
= 35145.155
_________
5
a = 7029.031
78
Sales for the year 2020- 2021 to 2024- 2025
Y= a+bX
 2020- 2021
Y= 7029.031+ 1040.095*6
= 7029.031+ 6240.57
= 13269.601
 2021- 2022
Y= 7029.031+ 1040.095*7
= 7029.031+ 7280.665
= 14309.696
 2022- 2023
Y= 7029.031+ 1040.095*8
= 7029.031+ 8320.76
= 15349.791
 2023- 2024
Y= 7029.031+ 1040.095*9
= 7029.031+ 9360.855
= 16389.886
 2024- 2025
Y= 7029.031+ 1040.095*10
= 7029.031+ 10400.95
= 17429.981
79

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FINANCIAL PERFORMANCE ANALYSIS OF NESTLE

Under the guidance of

Accredited by NAAC with ‘A’ Grade

DEPARTMENT OF MANAGEMENT STUDIES

MAR ATHANASIOS COLLEGE FOR ADVANCED STUDIES

Mr.Jibumon K G Dr.Sudeep B Chandramana

Rev. Dr.Cherian J Kottayil UniversityExaminer

I hereby declare that this project report entitled “FINANCIAL

Date : 31/05/2021 AMAL BIJU

5.14 NET SALES 62

5.17 COMPARITIVE BALANCE SHEET OF NESTLE INDIA LTD FOR 67

Fig No: Particulars Page No

5.2 ESTIMATED PROFIT FOR 2020-21 TO 2024-25 61

B.C : Before Christ

Sl.NO CHAPTERS PAGE NO

2.1 Business process of the study 7-11

03 3.1 Brief theoretical construct related to the problem 28-37

04 4.1 Research Approach and design 41

1.2 STATEMENT OF PROBLEM

1.3 RELEVANCE AND SCOPE OF THE STUDY

2.1 BUSINEES PROCESS OF THE STUDY

1. Primary Business Process

PRIMARY BUSINESS PROCESSES OF NESTLE

1. OUTBOND SALES LOGISTICS

 Distributing products and services to customers.

 Helping customers to buy the products or services of the firm.

 Activity to improve company's product or services.

2.2 MARKET DEMAND AND SUPPLY- CONTRIBUTION TO GDP-

The Gross Domestic Product popularly known as GDP of an economy requires

Revenue from operations is a measure of how much revenue a company is generating

2.3 LEVELS AND TYPES OF COMPETITION- FIRMS OPERATING

Five main competitive strategies are:

 Overall low cost leadership strategy

In the FMCG sector has made it highly competitive.

 PRODUCT LINE PRICING

 OPTIONAL PRODUCT PRICING

 CAPTIVE PRODUCT PRICING

 PRODUCT BUNDLE PRICING

This approach is used where external factors such as recession or increased

5 COMMON WAYS FMCG MESS UP PRICING AND PAY THE PRICE

1. Consumer price based on Product Cost only

2. Issue Price Guidelines without limits on percentage of units sold on

3. Do not align Pricing with Brand Positioning

In some organizations Marketing finalizes the Brand Positioning and

4. Decide Pricing without understanding the Category and

Sometimes in smaller, less sophisticated organiza tions management does

While this appears to be elementary, you will be surprised how many

BIGGEST CHALLENGES IN FMCG

3. Online Grocery Shopping

4. Environment & Sustainability

The sales organization involved in the marketing/selling, inside employees, and

The promotional program to support the introduction: advertising, trade shows,

2.6 KEY DRIVERS OF THE INDUSTRY

 Demand for complete new product type

 Green or clean products

 Pressure to reduce time to market

In processed foods, innovation is important to increase growth and profits. Companies

 Compliance with regulations

The main financial statements are: