Fiancial Mangement CIA - 3

CIA 3
Financial Management
SUBMITTED TO:
PROF. DR. GUPTESWAR PATEL

School of Business and Management
Christ (Deemed to be University),
Bengaluru
SUBMITTED BY:
Saakshya Kulshreshtha (2320850)

Mishti Mahajan (2320831)
Arya
Rajesh(2320810)
2BBA-H
INTRODUCTION TO THE SECTOR & COMPANY
TITAN COMPANY. (RETAIL SECTOR):
Titan Company Limited is a renowned name in the retail sector, offering a diverse range of lifestyle products.
Established in 1984, Titan has become synonymous with innovation, quality, and customer satisfaction.
Specializing in watches, jewelry, eyewear, and accessories.
Titan has carved a niche for itself in the market through its commitment to craftsmanship and design excellence.
With a strong retail presence across India and a growing global footprint, Titan continues to delight customers with
its timeless creations and unparalleled shopping experience. Committed to ethical practices and sustainability, Titan
stands as a beacon of trust and style in the retail landscape.
ULTA BEAUTY (RETAIL SECTOR):
The retail sector comprises businesses involved in selling goods and services directly to
consumers. It includes stores and online shops. Retailers sell stuff we need and want, like clothes
and food. They connect makers to buyers, making shopping easy for
us.
Ulta Beauty is a notable store that sells cosmetics, skincare, and hair
products. It was established by Richard E. George in 1990. It is
settled in Illinois. Ulta Beauty offers a different scope of
magnificence
things. Clients value the wide determination of cosmetics and hair care items accessible at Ulta
Beauty stores. One of Ulta Beauty's assets is its successful monetary administration. With its
obligation to offer quality items at reasonable costs, Ulta Excellence has turned into a favored
location for beauty devotees looking for different choices.
WHIRLPOOL CORPORATION (RETAIL SECTOR):
Every person and family that consumes products and services inside an economy is referred to as
the household sector. It covers both discretionary spending on things like entertainment and
vacation as well as purchases of needs like food, clothing, and housing. A major force behind
economic activity is household spending, which is impacted
by several variables including income levels, consumer
confidence, and governmental regulations.
Based in Benton Charter Township, Michigan, United States,

Whirlpool Corporation is a global producer and seller of
household appliances. Established in 1911, Whirlpool is a leading worldwide producer of
appliances including refrigerators, washers, dishwashers, and air conditioners. The company
operates in over 170 countries and is recognized for creating innovative, high-quality, and
environmentally friendly products. Whirlpool Corporation aims to be the most beloved, reliable,
and innovative kitchen and laundry brand globally by offering products and services that
improve customers' home lives.
CAPITALIZATION POSITION
Capitalization refers to the valuation of the total business. The total value of a firm's
outstanding securities, such as stocks and bonds, which reflect equity and debt in the
company, is referred to as capitalization.
CAPITAL STRUCTURE (IN CRS)
Sources of 2022-2023 2021-2022 2020-2021

Finance (31/3/23) (31/3/22) (31/3/21)
(Rs.) (Rs.) (Rs.)
Equity share 49.25 49.25 49.25
Capital
(Par value: Rs. 2)
Reserves & 2839.97 2476.85 2349.14
surplus
Debentures 2547.31 2820.93 1936.73
(Long term + (849.03 (972.06 (1188.48
Short term +1698.2) +1848.8) +748.25)
borrowings)
Source: Balance sheet & Capital structure from Money control website
ANALYSIS OF CAPITAL STRUCTURE:
Titan raises funds through equity capital by selling shares, and representing ownership with
voting rights and profit claims. With a total authorized share capital of Rs. 125 crores and equity
shares worth Rs. 2 each, the equity share capital remains constant at Rs. 49.25 crores. Reserves
and surpluses increased by 20.89% from 2020-2022, indicating financial stability and growth.
Debt capital, including debentures, increased by 31.52% from Rs. 1936.73 crore in 2020 to Rs.
2547.31 crore in 2022. The capital structure of TITAN and Industries is a mix of equity and
debt financing. Equity financing is represented by Equity Share Capital and Reserves and
Surplus, while debt financing is represented by Long-Term Borrowings and Short-Term
Borrowings. The company seems to rely more on equity financing than debt financing, as
indicated by the higher value of shareholders' funds compared to borrowings in the year 2022-
2023 (FY 2022).
Debt-Equity Mix Ratio’s FY 2020-2022 (Amount in crores)
FY 2022 FY 2021 FY 2020
Debt Equity Debt- Debt Equity Debt- Debt Equity Debt-

equity equity equity
(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
ratio ratio ratio
2547.31 2889.22 0.88 2820.93 2526.10 1.12 1936.73 2398.39 0.81

times times times
Note: Debt Equity Ratio = Total debt / Total equity
Analysis:
The debt-equity ratio fluctuates over three years. It was 0.81 in 2020-2021, rose to 1.12
in 2021- 2022, then fell to 0.88 in 2022-2023.
A lower ratio means less debt compared to equity, suggesting a safer financial setup. A
higher ratio implies more debt, potentially indicating greater financial risk.
The increase from 2020 to 2021 shows Titan Industries took on more debt relative to
equity, possibly for expansion or new projects, or managing working capital.
However, the decrease from 2022 to 2023 suggests Titan reduced debt compared to
equity, possibly to reduce leverage, financial stability or optimize its finances.

Capitalization Related Theories:
Pecking order theory:
Pecking order theory suggests a hierarchical order in which businesses utilize three types of
financing: internal funds, debt, and equity to fund investment opportunities.
□ Use of Internal Financing - Titan appears to align with the Pecking Order Theory by
primarily relying on internal financing, rather than issuing new shares to raise
capital. Titan has maintained consistency in its equity issuance over the years, with the
authorized and issued capital remaining the same. Consistent equity issuance indicates a
preference for internal funding over external financing options.
□ Preference for Debt over Equity - Examining the debt-equity ratios from FY 2020-2022,
reveals a fluctuating trend as shown in the above debt-equity mix table. Notably, the ratio
increased from 0.81 times in FY2020 to 1.12 times in FY 2021, indicating that the
company is prioritizing debt over equity when seeking additional funding, as per the
theory. However, this ratio decreased to 0.88 times in FY 2022, indicating a strategic
move towards reducing reliance on debt financing over equity, to reduce the
financial risk and leverage. This decline implies that Titan might have significantly
retained earnings, as reflected in the financial statements for that period, which also
indicates that the company might have achieved huge profits over that period. This
aligns with the Pecking Order Theory's preference for internal financing over external
sources.
Conclusion: Titan Industries appears to adhere to the Pecking Order Theory in its financing
decisions. By predominantly relying on internal financing for financial needs and preferring debt
over equity when additional funds are required. This strategy allows Titan to maintain control
and avoid diluting ownership while financing its operations and investments.
□ Three assumptions aligned with the company's practices and the implications:
● Asymmetric information: Titan consistently chooses internal funding over

external sources, reflecting a conservative financing approach. This aligns with
the Pecking Order Theory, indicating that firms prefer internal funds due to lower
information disparity and agency costs associated with external financing. By
relying on internal financing, Titan avoids signaling effects and costs linked with
equity issuance, maintaining financial flexibility and control.
● No taxes: Despite the Pecking Order Theory assuming no tax advantages between
debt and equity financing, Titan, subject to taxation, would still weigh tax
implications. They may prioritize debt financing due to potential tax shields from
interest payments.
● Investment decisions not being influenced by financing decisions: While the
theory assumes investment decisions are unaffected by financing choices, in
practice, financing availability and costs can influence investment decisions. Titan
may primarily favor internal funds for investments but would also consider
external financing options when assessing investment opportunities.
CAPITAL STRUCTURE (IN $)
2022-2023 2021-2022 2020-2021

Sources of Finance
(31/3/23) (31/3/22) (31/3/21)
($) ($) ($)
Total 0.81 B 0.88 B 0.96 B
shareholder’s (Rs 6777.28 (Rs 7370.24 (Rs 8097.28
Equity crores) crores) crores)
Debentures 3.4B 3.2B 3B
(Long term + (Rs 28,451.2 (Rs 26,806.6 (Rs 25,104
Short term crores) crores) crores)
borrowings)
Reserves & 995M 653M 1,189M
surplus (Rs 8,320.005 (Rs 5,464.627 (Rs
crores) crores) 9,926.251
crores)
Source: Balance sheet of company
An examination of Ulta Beauty's capital structure over the past three years reveals a trend of
steady growth in both equities, share capital and debentures. Examining equity share capital
specifically, the company has seen consistent increases year-on-year. In 2021, the round equity
share capital stood at approximately $1.53 billion. This figure grew by an estimated 17.7% in
2022, reaching
$1.80 billion. The upward trend continued in 2023, with the equity share capital reaching an
estimated $1.96 billion, reflecting an additional increase of approximately 8.9% compared to the
previous year.
Debt-Equity Mix Ratio’s FY 2020-2022 (Amount in thousand $)
FY 2022 FY 2021 FY 2020
Debt Equity Debt- Debt Equity Debt- Debt Equity Debt-

equity equity equit
($) ($) ($) ($) ($) ($)
ratio ratio y
ratio
2.21 1.96 1.12 2.16 1.53 1.41 1.91 2 0.95
Note: Debt Equity Ratio = Total debt / Total equity
Analysis:
The debt-equity ratio fluctuates over three years. It was 0.95 in 2020-2021, rose to 1.41
in 2021- 2022, then fell to 1.96 in 2022-2023.
A lower ratio means less debt compared to equity, suggesting a safer financial setup. A
higher ratio implies more debt, potentially indicating greater financial risk.
The increase from 2020 to 2021 shows Ulta Beauty Industries took on more debt relative
to equity, possibly for expansion or new projects, or managing working capital.
However, the decline from 2022 to 2023 suggests Ulta Beauty reduced debt compared to
equity, possibly to reduce leverage, financial stability or optimize its finances.
Trade-off Theory:
The Trade-off Theory says that companies find their optimal capital structure by adjusting the
benefits and costs of debt and equity financing. It involves careful assessment of advantages like
tax shields against potential drawbacks such as financial distress and agency costs.
Alignment with Ulta Beauty's Capital Structure:
□ Dynamic Debt-Equity Ratios: Ulta Beauty's debt-to-equity ratios have changed over the
the course of time, as seen by the organization's capital structure. Considering that the
enterprise adjusts its leverage levels because of changes in the market and its monetary
position, this is steady with the Trade-off Theory. To take advantage of tax advantages
and prevent equity dilution, Ulta Beauty may raise its debt levels during periods of
expansion or investment possibilities.
□ Strategic Management of Financial Risk: Ulta Beauty's strategic balancing act in
controlling its debt and equity levels is consistent with the Trade-off Theory's emphasis
on risk management. It displays a proactive attempt to limit financial risk. When
selecting how much leverage to utilize, the firm measures the expenses of a financial
crisis against the tax benefits of borrowing. Ulta Beauty aims to increase shareholder
value while optimizing its financial risk profile by strategically adjusting its capital
structure.
Conclusion: In summary, Ulta Beauty's capital structure largely conforms to the Trade-off
Theory's criteria. Through strategic risk management, dynamic debt-equity management, and a
preference for internal financing, the firm hopes to achieve an optimal balance between the
benefits and drawbacks of debt and equity financing.
Three Assumptions Aligned with Ulta Beauty's Practices and Implications:
Tax Shields from Debt Financing: Ulta Beauty's use of debt is consistent with the
expectation of tax benefits from debt. Leveraging debt allows the company to deduct
interest expenses from taxable income, cutting its tax burden while improving after-tax
profitability, which is consistent with the Trade-off Theory's expectation of tax benefits
from debt financing.
Financial Flexibility and Control: Ulta Beauty's decision to use internal finance reflects
a cautious approach to retaining financial flexibility and control over its capital
structures. This aligns with the premise that corporations should prioritize internal capital
to reduce information asymmetry and agency costs, allowing Ulta Beauty to respond
more effectively to market conditions and investment possibilities while expanding
shareholder wealth.
Dynamic Leverage Decisions: Ulta Beauty's dynamic debt and equity management is
based on the idea that leverage decisions are adaptive and impacted by market conditions
and firm-specific factors. Ulta Beauty optimizes its financial risk profile and capitalizes
on opportunities by modifying its capital structure over time, weighing the costs and
advantages of debt financing. This strategic strategy is consistent with the Trade-Off
Theory's ideas.
CAPITAL STRUCTURE (IN CRS)
Sources of 2022-2023 2021-2022 2020-2021

Finance (31/3/23) (31/3/22) (31/3/21)
(Rs.) (Rs.) (Rs.)
Equity share 126.87 126.87 126.87
Capital
Reserves & 2979.79 2852.35 2696.29
surplus
Debt 111.67 133.59 50.83
Source: Balance sheet & Capital structure from Money control website & Long-Term debt
- https://www.indiainfoline.com/company/whirlpool-of-india-ltd-share-price-balance-
sheet/financials/328
Whirlpool has maintained a steady capitalization of equity shares, demonstrating a stable

ownership structure without significantly altering the total number of shares issued. Reserves and
Surplus, between FY 2020 and FY 2022, reserves and surplus increased steadily, with yearly
percentage changes ranging from 4.46% to 9.51%. This may indicate Whirlpool's solid financial
performance and profitability as it shows that the company has been able to hold onto earnings
and build a surplus. In FY 2021, Whirlpool's debt increased from FY20, presumably as a result
of accounting or restructuring issues. It reduced to 16.4% in FY 2022, indicating a reduction in
leverages. Overall, it increased from FY20–FY22, perhaps as a result of repayments or a
conservative strategy.
Debt-Equity Mix Ratio’s FY 2020-2022 (Amount in crores)
FY 2022 FY 2021 FY 2020
Debt Equity Debt- Debt Equity Debt Debt Equity Debt-

equity equity equity
(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
ratio ratio ratio
111.67 3106.66 0.03 133.69 2979.22 0.04 50.83 2823.16 0.01

times times
times
Note: Debt Equity Ratio = Total debt / Total
equity Analysis:
The company's financial structure seems to have undergone changes, marked by fluctuations in
debt levels and corresponding debt-equity ratios. This may indicate varying strategies in
financing or investment decisions across the years, with a notable increase in debt reliance in FY
2022.
Modigliani-Miller theory
This theory states that in a perfect capital market without taxes, bankruptcy costs the value of a
company independent of its capital structure. This means that the total worth of a company
remains the same regardless of whether it chooses to finance its activities through debt or equity.
The theorem asserts that the cost of capital remains unchanged regardless of the firm's debt-to-
equity ratio and that investors are indifferent to receiving returns from capital gains or dividends.
Three assumptions aligned with the company's practices and the implications:
Perfect Capital Markets: The theorem assumes the presence of effective and perfect
capital markets, where investors can trade securities without any transaction expenses and
can obtain all relevant information. In these types of markets, the value of a company's
shares accurately reflects its true value.
No Taxes: It is also assumed that corporate taxes are non–existent. In the absence of
taxes, businesses find debt financing more attractive than equity financing because
interest payments on debt can be deducted from taxes.
Constant Returns to Scale: According to the theory, businesses function in an
environment where there is a constant return to scale and no economies or diseconomies

of scale as a business’s size varies.
No Transaction Costs or Bankruptcy Costs: MM theorem also assumes that there are
no transaction costs associated with issuing securities or restructuring the firm's capital.
Additionally, there are no costs associated with financial distress or bankruptcy.
COMPANIES AND THEIR INDUSTRY COMPARISON:
2022-23 2021-22 2020-21
D/E JK Ulta Whirlpool JK Ulta Whirlpool JK Ulta Whirlpool

Ratio Tyres Beauty Tyres Beauty Tyres Beauty
(Rs) (Rs) (Rs)
(Rs) ($) (Rs) ($) (Rs) ($)
Equity 2889.22 1.96 3106.66 2526.1 1.53 2979.22 2398.39 2 2823.16

Capital
Debt 2547.31 2.21 111.67 2820.93 2.16 133.69 1936.73 1.91 50.83
financing
D/E 0.88 1.12 0.03 times 1.12 1.41 0.04 times 0.81 0.95 0.01 times
Ratio times times times times times times
In theory, the lower the debt-equity ratio, the better the capital structure. Whirlpool maintains a
low debt-equity ratio comparatively throughout the 3 years, while Ulta Beauty and Titan
maintain between 0.1 to a 2.0 ratio only. Whirlpool’s history suggests that they have relied less
on debt.
In conclusion, Whirlpool (Household Industry) may seem to be the strongest of the
three in its capital structure, but practically this may not be so when considering other
variable factors. Also, financially it’s very stable and when it comes to market position it
acts as a leader in its respective industry. Whirlpool has many growing opportunities
through innovation and expansion. Economic change can be seen as a risk factor for it.
Ulta Beauty (Retail Industry) seems to be the second-highest in the capital structure and
looks more realistic. Also, financially it’s stable but has slightly more debt and when it
comes to market position it acts as a leader in its respective industry. Ulta Beauty has
many growing opportunities through innovation and expansion. Economic change can be
seen as a risk factor for it.
Titan (Automotive Industry) ranks last in its capital structure and is also less stable due
to fluctuating high ratios. Also, the finance fluctuates and carries more debt and when it
comes to market position it faces tougher competition in its respective industry. Titan
could explore new markets. and technologies. Economic change and additional factors
can be seen as a risk factor for it.
COST OF CAPITAL
1) Financial Year 2022-23:
Cost of Debt (kd):
❖ Before-Tax Cost:
Before-tax Cost of Debt = Interest expense / Total Borrowings
From the Cash Flow Statement and Balance Sheet of FY21

● Interest Expenses =₹230,00,00,000
● Total Borrowings =₹2547,31,00,000
Before tax Cost of Debt = 258,00,00,000/2547,31,00,000
❖ After Tax Cost:
After-tax Cost of Debt = Kdb * (1 – Tax Rate)
{Calculation of Tax rate –
100% Tax – 270 crores (EBT)

(x) - 86 crores (Tax amount)
(x) = 86 Cr. / 270 Cr. * 100%
(x) = 32 %
Therefore, Tax rate = 32%}
After-tax Cost of Debt = 10.1%* (1 - 0.32)
Cost of Equity:
Cost of Equity = Earnings per share / Market price per share

● Earnings per share (EPS) = 7.45 (income statement of FY22)
● Market price per share on 31/3/23 =
158.15 Cost of Equity = EPS / MP
= 7.45 / 158.15
Capital Structure Weights:
Weight of Debt = Total Debt / (Total Debt + Total Equity)
= 2547,31,00,000/ (2547,31,00,000+ 2889,22,00,000)
= 0.468 or 46.8%
Weight of Equity = 1 - Weight of Debt
= 1 – 0.468
= 0.531 or 53.1%
WACC Calculation:
With the cost of debt and implied cost of equity, we can calculate the WACC using the
following formula:
WACC = (Cost of Debt * Weight of Debt) + (Cost of Equity * Weight of Equity)
WACC = (6.86% * 0.468) + (4.7% * 0.531)
= 3.2% + 2.5%
WACC = 5.7% (FY 2022-23)
Therefore, based on the provided information and assumptions, the estimated cost of capital
(WACC) for JK Tyres & Industries Ltd for FY 2022 is approximately 5.7%/
Cost of Debt (kd):

❖ After Tax Cost:
100% Tax – 264 crores (EBT)

(x) - 81 crores (Tax amount)
(x) = 81 Cr. / 264 Cr. * 100%
(x) = 31 %
After tax Cost of Debt = 8.1%* (1 - 0.31)
Cost of Equity:

= 7.43 / 128.4
= 2820,93,00,000/ (2820,93,00,000+ 2526,10,00,000)
= 0.527 or 52.7%
= 1 – 0.527
= 0.472 or 47.2%
WACC Calculation:
With the cost of debt and implied cost of equity, we can calculate the WACC using the following
formula:
WACC = (5.6% * 0.527) + (5.7% * 0.472)
= 2.43% + 3.2%
WACC = 5.63% (FY 2021-22)
(WACC) for JK Tyre & Industries Ltd for FY 2021 is approximately 5.63%.
Cost of Debt (kd):


❖ After Tax Cost:
100% Tax – 395.56 crores (EBT)

(x) - 139.11 crores (Tax amount)
(x) = 139.11 Cr. / 395.56 Cr. * 100%
(x) = 35 %
Kda = 9 %
Cost of Equity:

● Market price share on 31/21 =
= 12.97 / 121.76
= 1936,73,00,000/ (1936,73,00,000+ 2398,39,00,000)
= 0.446 or 44.6 %
= 1 - 0.446
= 0.553 or 55.3%
WACC Calculation:
following formula:
WACC = (9% * 0.446) + (10.6% * 0.553)
= 4% + 5.8%
WACC = 9.8% (FY 2022-23)
(WACC) for JK Tyre & Industries Ltd for FY 2020 is approximately 9.8%.
2022-23 2021-22 2020-21
Sources Proportion Cost Weighted Proportion Cost Weighted Proportion Cost Weighted
of Funds cost % cost % cost %
(w) % (x) (w) % (x) (w) % (x)
% % %
Equity 53.1 4.7 2.5 42.7 5.7 2.43 55.3 10.6 5.8
Capital
Debt 46.8 6.86 3.2 57.2 5.6 3.2 44.6 9 4

financing
Weighted Average Cost of 5.7 % WACC 5.63% WACC 9.8%

capital
Cost of Debt (kd):

● Interest Expenses = ($49,34,000)
● Total Borrowings = ($3,41,06,00,000)
Before tax Cost of Debt = 49,34,000/3,41,06,00,000

❖ After Tax Cost:
100% Tax = 1,64,35,44,000 (EBT)

(x) = 40,11,36,000(Tax amount)
(x) = 40,11,36,000/ 1,64,35,44,000 * 100%
(x) = 24.4 %
Therefore, Tax rate = 24.4%
Cost of Equity:

● Earnings per share (EPS) = $24.174 (income statement of FY22)
$513.96 Cost of Equity = EPS / MP
= 24.174/ 513.96
= 3,41,06,00,000/ (3,41,06,00,000+ 1,95,98,11,000)
= 63.5%
= 1 – 0.635
= 36.5%
WACC Calculation:
formula:
WACC = (0.10%* 0.635) + (4.7% * 0.365)
= 0.06% + 1.71%
= 1.77%
(WACC) for ULTA BEAUTY for FY 2022 is approximately 1.77%.
Cost of Debt (kd):

● Interest Expenses =$16,63,000
● Total Borrowings =$3,22,90,06,000
● Before tax Cost of Debt = 16,63,000/3,22,90,06,000
❖ After Tax Cost:
100% Tax – 1,29,58,29,000 (EBT)

(x) - 30,99,92,000(Tax amount)
(x) = 30,99,92,000/ 1,29,58,29,000 * 100%
(x) = 23.92 %
Therefore, Tax rate = 23.92%
Cost of Equity:

$358.83 Cost of Equity = EPS / MP
= 18.09 / 358.83
= 3,22,90,06,000/ (3,22,90,06,000 + 1,53,53,73,000)
= 67.77%
= 1 – 0.677
= 32.3%
WACC Calculation:
following formula:
WACC = (0.03%* 0.677) + (5.04% * 0.323)
= 0.02% + 1.62%
= 1.64%

Cost of Debt (kd):

● Interest Expenses =$57,35,000
● Total Borrowings = $ 3,09,04,20,000
● Before tax Cost of Debt = 57,35,000/3,09,04,20,000
❖ After Tax Cost:
100% Tax – 23,10,85,000(EBT)

(x) = 5,52,50,000 (Tax amount)
(x) = 5,52,50,000 / 23,10,85,000 * 100%
(x) = 23.9 %
Therefore, Tax rate = 23.9%}
Cost of Equity:

= 3.12 / 290.82

= 3,09,04,20,000/ (3,09,04,20,000 + 1,99,95,49,000)
= 60.7 %
= 1 - 0.133
= 39.3%
WACC Calculation:
following formula:
WACC = (0.13% * 0.607) + (1.07% * 0.393)
= 0.078% + 0.42%
= 0.49%
2022-23 2021-22 2020-21
(w) % (x) (w) % (x) (w) % (x)
% % %
Equity 36.5 4.7 1.71 32.3 5.04 1.62 39.3 1.07 0.42
Capital
Debt 63.5 0.10 0.0635 67.77 0.03 0.02 60.7 0.13 0.07
financing
Weighted Average Cost of 1.77 % WACC 1.64 % WACC 0.49%

capital
Cost of Debt (kd):

● Total Borrowings =₹ 85.02 Cr.
Before tax Cost of Debt = 12.5 / 85.02 Cr.
❖ After Tax Cost: After-tax Cost of Debt = Kdb * (1 – Tax Rate)


(x) = 61.79 crores (Tax amount)
(x) = 61.79 Cr. / 246.65 Cr. * 100%
(x) = 51.4 % or 0.514
Therefore, Tax rate = 51.4 %}
After tax Cost of Debt = 14.7*(1- 0.514)
Cost of Equity:

= 14.57 / 132.02
= 85020000/ (85020000+1,268,700,000)
= 616,870,000,000 / 13537200000
= 45.5% or 0.445
= 1 – 0.445
= 0.555 or 55.5 %
WACC Calculation:
following formula:
WACC = (7.1% *0.445) + (11 % + 0.55)
= 3.1 % +6.05 %
WACC = 9.15 % (FY 2022-23)
(WACC) for Whirlpool ltd. for FY 2022 is approximately 9.15 %
Cost of Debt (kd):
Before-Tax Cost:

● Interest Expenses =₹ 14,720,000,000
● Total Borrowings =₹105.10 crores
Before tax Cost of Debt = 14,720,000,000 /105,100,000
❖ After Tax Cost:

(x) = 80.74 Cr. / 303. 59 Cr. * 100%
(x) = 26.58%
Therefore, Tax rate = 26.58%%}
After tax Cost of Debt = 14%* (1 – 0.268)
Cost of Equity:

= 17.56 / 172.7

= 105,100,000 / (105,100,000 + 2526,10,00,000)
=0.453 or 45.3 %
= 1 – 0.453
= 0.547 or 54.7 %
WACC Calculation:
following formula:
WACC = (10.2 % * 0.4) + (10.1 % *0.547)
= 4.5% + 5.4%
WACC = 9.9 % (FY 2021-22)
(WACC) for Whirlpool Ltd for FY 2021 is approximately 9.9 %
Cost of Debt (kd):

● Interest Expenses = ₹15,34,00,000.
● Total Borrowings = ₹50,83,00,000
Before tax Cost of Debt = 15,34,00,000. / 50,83,00,000
❖ After Tax Cost:


(x) = 117.87 Cr. / 451.14 Cr. * 1 (x)
= 26.12%
Therefore, Tax rate = 26.12%}
After tax Cost of Debt = 30.1%* (1 – 0.261)
Cost of Equity:

= 26.27/ 220.35
= 50,83,00,000 / (50,83,00,000 + 2398,39,00,000)
= 2.07 %
= 1 – 0.0207
= 97.83%
WACC Calculation:
formula:
WACC = (22.2% * 0.0207) + (11.9% * 0.9783)
= 0.46 % + 11.64%
=0.121 or 12.1%
(WACC) for Whirlpool for FY 2020 is approximately 12.1 %.
2022-23 2021-22 2020-21
(w) % (x) (w) % (x) (w) % (x)
% % %
Equity 55.5 11 1.71 54.7 10.1 1.62 97.83 11.9 11.64

Capital
Debt 45.5 7.1 0.0635 45.3 10.2 0.02 2.07 22.2 0.46
financing
Weighted Average Cost of 9.15 % WACC 9.9% WACC 12.1%

capital
2022-23 2021-22 2020-21
WACC JK Ulta Whirlpool JK Ulta Whirlpool JK Ulta Whirlpool

Tyres Beauty Tyres Beauty Tyres Beauty
(%) (%) (%)
(%) (%) (%) (%) (%) (%)
WACC 5.7 1.77 9.15 5.63 1.64 9.9 9.8 0.49 12.1
In the past three years, from 2020-21 to 2022-23, Titan has displayed a significant decrease in its
weighted average cost of capital (WACC), declining from 9.8% to 5.7%. This substantial
reduction indicates a positive trend in the company's ability to efficiently finance its operations
and investments. Ulta Beauty, on the other hand, has shown significant increase in WACC from
FY20 to FY22, but it relatively stood stable over FY21 and FY22, this increase indicates a
higher perceived risk by investors or changes in market conditions suggesting a challenging cost
of capital structure. In contrast, Whirlpool has experienced notable volatility in its WACC
from
FY20 to FY22, ranging from 12.1% to 9.15%, potentially indicating shifts in the company’s risk
profile or capital structure strategies.
Overall, Titan demonstrated with the most significant improvement in WACC with a notable
decrease in WACC over three-year period, Ulta Beauty grapples with fluctuations, possibly
reflecting varying market conditions and strategic decisions across the respective industries,
while Whirlpool’s volatility may stand out on strategic adjustments in its capital structure
amidst evolving market conditions.
DIVIDEND STRATEGIES
A dividend decision is a financial decision that a company makes about how to distribute its
earnings. It involves deciding how much of a company's earnings to distribute to shareholders
and how much to retain within the company
Dividend Statement (FY22)

Dividend Statement (FY21) Dividend Statement (FY20)
Dividend Distribution Policy: This policy reflects

JK Tyre's commitment to balancing shareholder
returns with the company's financial health and
strategic priorities. It assures shareholders of a
potential dividend income while allowing flexibility
for the company to allocate resources as needed for
growth, debt reduction, or other strategic initiatives,
thereby safeguarding long-term sustainability and
value creation. The company has been using the same
Dividend Distribution Policy for the past 3 years.
There is no change in it.
Source: DividendDistribution.pdf (jktyre.com)
DIVIDEND AMOUNT
Particulars Years
2022-2023 2021-2022 2020-2021
Dividend per share Rs. 2.00 per share Rs. 1.50 per share Rs. 2.00 per share
Initially, the dividend per share remained stable at Rs. 2.00 at 2020-2021 & 2022-2023.
However, in 2021-2022, there was a slight decrease to Rs. 1.50 per share, possibly influenced
by factors like changes in profitability or cash flow. Subsequently, in 2022-2023, the company
returned to the previous dividend level of Rs. 2.00 per share, indicating a potential
temporary adjustment with a return to its prior dividend policy.
DIVIDEND PAYOUT RATIO
Particulars 2022- 2021- 2020- % Change

2023 2022 2021
Dividend payout Ratio 20 % 26.9% 6.72 % FY 20 - FY21: 20.18%
(NP) FY 21- FY22: - 6.81%
FY 20- FY22: 13.37%
The reduction in dividend payout ratio of 6.81% from FY21 to FY22 indicates that JK Tyre
retained a higher portion of its net profits in FY22 compared to FY21. This suggests that the
company is retaining a higher portion of its profits rather than distributing them as
dividends during that period of time. A lower payout ratio could imply increase reinvestment
in the business for growth opportunities or strengthening the company's financial position, but
also leads to immediate lower returns, decreased return on equity and market perception.
The Ulta Beauty, as of the latest financial statements available, does not pay out dividends to its
shareholders. This decision is in line with the company's strategic priorities and financial
objectives. Below is evidence from the financial statements confirming this fact:
This policy reflects Ulta Beauty's focus on reinvesting profits into its business operations and
growth initiatives to enhance shareholder value over the long term.

Dividend Distribution Policy:
Whirlpool's dividend policy seems to be consistent and shareholder-friendly. The company has
been paying a final dividend of Rs. 5.00 per share (50% of face value) consistently over the past
few years, with the most recent dividend being declared on 18-08-2023. This regularity and the
significant dividend payout ratio indicate that Whirlpool values rewarding its shareholders with a
portion of its profits.
DIVIDEND AMOUNT
Particulars Years
2022-2023 2021-2022 2020-2021
Dividend per share Rs. 5.00 per share Rs. 5.00 per share Rs. 5.00 per share
The dividend amount per share for Whirlpool has remained consistent at Rs. 5.00 per share for
the years 2020-2021, 2021-2022, and 2022-2023. This consistency suggests that Whirlpool has a
stable dividend policy and aims to provide shareholders with a predictable return on their
investment.
DIVIDEND PAYOUT RATIO
Particulars 2022- 2021- 2020- % Change

2023 2022 2021
Dividend payout Ratio 28.46 % 19.03% 13.31 % FY 20 - FY21: 5.72%
(NP) FY 21- FY22: 9.43%
FY 20- FY22: 15.15%
In FY 2021, the dividend payout ratio rose by 5.72% over FY 2020. This suggests that
Whirlpool raised dividend payouts throughout this time in comparison to its net profit. Between
FY 2021 and FY 2022, the dividend payout ratio increased by an additional 9.43%. This implies
that in comparison to its net profit, Whirlpool kept raising its dividend payouts. A greater
emphasis on providing value to shareholders may be shown by the larger growth when compared
to the prior period. From FY 2020 to FY 2022, the dividend payout ratio increased by a total of
15.15 percent. It implies that Whirlpool has gradually increased the size of its dividend policy,
maybe as a sign of confidence in its ability to generate cash flow and do well financially.
Whirlpool's dividend payout ratio has risen gradually over time, suggesting that a greater
percentage of its profits are being distributed as dividends by the company. This might be
interpreted as a vote of confidence in the company's financial performance and a commitment to
provide value to shareholders. Growing operational leverage ratios point to higher fixed
expenses in relation to contribution, which suggests that earnings are more susceptible to
variations in sales volume across the scenarios considered.
2022-23 2021-22 2020-21
JK Ulta Whirlpool JK Ulta Whirlpool JK Ulta Whirlpool

(%) (%) (%)
(%) (%) (%) (%) (%) (%)
Dividend 20 0 28.46 26.9 0 19.3 6.72 0 13.31

Payout
Ratio
Titan has displayed a significant increase in dividend payout ratios, suggesting that they
distributed a larger portion of their portion of their earnings as dividends over 2020-21 to 2021-
22. Later on, there was a slight decrease in the dividend payout ratio on 2022-23. The company
showed fluctuation but overall maintained a moderate dividend payout ratio. On the other hand,
Ulta Beauty did not distribute any dividends in the past three years, possibly focusing on
reinvestment for growth. While, Whirlpool demonstrated a notable increase in dividend payout
ratio for the past three years, indicating a commitment to returning earnings to shareholders.
Overall, Whirlpool’s growing dividend payout ratio might attract investors more who are seeking
income. While Ulta Beauty may be more appealing to those who cares or value on growth of the
business, as they reinvest the earnings for future growth. Titan offers a middle ground,
generating revenue while holding onto profits for future expansion or operational requirements.
LEVERAGE ANALYSIS
Leverages provides the framework for financing decision of the firm. It may be defined as an
employment of asset or source of funds for which the company has to pay a fixed costs or fixed
returns.
Calculation EBIT – EPS (Amount in crores)
Particulars Years
2022-2023 2021-2022 2020-2021
Revenue 9,618 8,032 9102.2

from operations
(9,538 + 80) (7,918 + 114)
(sales + other
operating income)
Less: Variable cost 8811 7301 7752.2
Contribution 807 731 1349.41

(EBITDA)
Less: Fixed costs 243 241 386.69
(Depreciation &
Amortization)
EBIT 564 490 962.72
Less: Finance costs 258 230 465.85

(Interest)
EBT (excluding 306 260 496.84

exceptional items)
Add: (36) 4 37.48

Exceptional items
EBT 270 264 534.35
Less: Provision for 86 81 200.91

Tax (Tax)
EAT 184 183 333.44

Calculation of No. of equity shares
Particulars Years
2022-2023 2021-2022 2020-2021
No of Equity shares 246,230,880 246,230,880 246,230,880
Calculation of EPS
Particulars Years
2022-2023 2021-2022 2020-2021
EPS = Earnings 184 / 183 / 333.44 /

available to equity crores crores crores
shareholders / Total 246,230,880 246,230,880 246,230,880
no of equity shares
= Rs. 7.45 = Rs. 7.43 = Rs. 12.97
Calculation of Leverages
Particulars Years
2022-2023 2021-2022 2020-2021
Financial Leverage 564 / 306 490 / 260 640.62 / 496.84
= EBIT / EBT = 1.84 times = 1.9 times = 1.3 times
Operating Leverage 807 / 564 731 / 490 886.61 / 640.62

= contribution / EBIT
= 1.43 times = 1.5 times = 1.4 times
Combined Leverage = 807 / 306 731 / 260 886.61 / 496.84

Contribution / EBT
Comment:
- The highest earnings per equity share in FY20 suggests the effectiveness of strategies
implemented during that period in boosting shareholder earnings. A higher EPS suggests higher
profitability per share, which can be attractive to investors.
- The company's reliance on debt (financial leverage) decreased slightly in FY22 compared
to FY21 but was more than FY20.
- The proportion of fixed costs in operations (operating leverage) increased in FY21 but
slightly decreased in FY22 and returned to the previous level as in FY20.
- The total risk associated with both leverages combined (combined leverage) increased in
FY21 but decreased slightly in FY22 but was more than FY20.
Calculation EBIT – EPS (Amount in $)
Particulars Years
2023 2022 2021
Revenue 1,02,09,000 86,31,000 61,52,000

from operations
(sales + other
operating income)
Less: Variable cost 83,29,000 70,65,000 56,17,000

Contribution 18,80,000 15,66,000 5,35,000
(EBITDA)
Less: Fixed costs 2,41,390 2,68,508 2,98,180

(Depreciation &
Amortization)
EBIT 16,38,610 12,97,492 2,36,820
Less: Finance costs 4934 1663 5735

(Interest)
EBT 16,43,544 12,95,829 2,31,085
Less: Provision for 4,01,136 3,09,992 55,250

Tax (Tax)
EAT 12,42,408 9,85,837 1,75,835
Particulars Years
2022-2023 2021-2022 2020-2021
No of Equity shares 51,403 54,482 56,351

Calculation of EPS
2022-2023 2021-2022 2020-2021
EPS = Earnings 12,42,408/51,403 9,85,837 / 54,482 1,75,835/ 56,351

available to equity
= $24.174 = $18.09 = $3.12
shareholders / Total
no of equity shares (2022.96 INR.) (1512.32 INR) (260.48 INR)
Particulars Years
2022-2023 2021-2022 2020-2021
Financial Leverage 1.63/ 1.64 1.297/1.295 0.236/0.231
Operating Leverage 1.88 /1.63 1.566B/ 1.297B 0.535 /0. 236

Combined Leverage = 1.88 / 1.64 1.566 / 1.295 0.535 / 0.231

Contribution / EBT
Comment:
- The highest earnings per equity share in 2023 suggests the effectiveness of strategies
implemented during that period in boosting shareholder earnings. A higher EPS suggests higher
profitability per share, which can be attractive to investors.
- The company's reliance on debt (financial leverage) drastically increased in 2021 by 13%
and again slightly increased in 2022 by 2.3%.
- -The increase in operating leverage over the years indicates an increase in fixed costs
relative to variable costs, possibly due to investments in infrastructure or expansion of
operations. This could lead to higher profitability when sales increase but also poses a greater
risk if sales decline.
- The increase in combined leverage suggests that the company's profitability is becoming
increasingly sensitive to changes in both sales revenue and financial structure
Calculation EBIT – EPS (Amount in crores)
Particulars Years
2023 2022 2021
Revenue from 6,210.25 5,993.4 5,899.89

operations (sales
+ other operating
income)
Less: Variable cost 5789.76 5536.69 5291.31
Contribution 420.49 456.71 608.58

(EBITDA)
Less: Fixed costs 161.35 136.28 142.10

(Depreciation &
Amortization)
EBIT 259.14 320.43 466.48
Less: Finance costs 12.50 14.72 15.34

(Interest)
EBT (Before 246.65 305.71 451.14
exceptional items)
Add: Exceptional - (2.11) -

Items
EBT 246.65 303.59 451.14
Less: Tax Amount 61.79 80.74 117.87
EAT 246.65 303.59 451.14
Particulars Years
2022-2023 2021-2022 2020-2021
No of Equity shares 1,26,87,00,000 1,26,87,00,000 1,26,87,00,000
Calculation of EPS
Particulars Years
2022-2023 2021-2022 2020-2021
EPS = Earnings 184.86 crores 222.85 crores 333.27 crores

available to equity /1,26,87,00,000 /1,26,87,00,000 /1,26,87,00,000
shareholders / Total
=Rs 14.57 = Rs 17.56 =Rs 26.27
no of equity shares
2022-2023 2021-2022 2020-2021
Financial Leverage 259.14/246.65 320.43/303.59 466.48/451.14
Operating Leverage 420.49/259.14 456.71/320.43 608.58/466.48

Combined Leverage = 1.05 * 1.62 1.06 * 1.42 1.03 * 1.3

FL * OL
Comment:
- The highest earnings per equity share in FY20 suggests the effectiveness of strategies
implemented during that period in boosting shareholder earnings. Higher EPS is suitable from
the point of view of the shareholder as it will increase the earnings of the equity shareholders
without loss of control over the company.
- The financial leverage ratios calculated indicate slight variations over the three periods,
suggesting marginal changes in the company's ability to use debt to magnify earnings.
- Growing operational leverage ratios point to higher fixed expenses in relation to

contribution, which suggests that earnings are more susceptible to variations in sales volume
across the scenarios considered.
- The combined leverage ratios indicate varying degrees of financial risk, with the highest
leverage indicating greater sensitivity to changes in both fixed costs and operating leverage.
2022-23 2021-22 2020-21
Leverages JK Ulta Whirlpool JK Ulta Whirlpool JK Ulta Whirlpool

(times) (times) (times)
(times) (times) (times) (times) (times) (times)
Financial 1.84 0.99 1.05 1.9 1.001 1.06 1.3 1.02 1.03
Operating 1.43 1.15 1.62 1.5 1.20 .42 1.4 2.25 1.3
Combined 2.63 1.14 1.7 2.85 1.20 1.5 1.82 2.31 1.33
Over the three years spanning from 2020-21 to 2022-23, the respective financial, operating, and
combined ratios for Titan, Ulta Beauty, and Whirlpool showcased varying trends. Titan
exhibited fluctuating financial ratios, ranging from 1.0 to 2.0, while Ulta Beauty maintained a
stable one, around 0.8 to 1.5. Whirlpool also maintained a stable in its financial ratio,
ranging from 1.0 to 1.5. Similarly, the operating ratios for all three companies varied, with
Titan maintaining relative stability compared to Ulta Beauty and Whirlpool. Overall, Ulta
Beauty demonstrated greater consistency in both financial and operating ratios, making it a
favorable choice in terms of financial performance over the period analyzed compared to other
companies. As, even though Titan maintained a relatively stable performance in operating
leverage, its financial leverage showed more variability compared to Ulta Beauty.
Titan's combined ratios fluctuated, ranging from 1.5 to 3.0, indicating variability in its overall
performance. Ulta Beauty also displayed fluctuations from FY 2020 to FY 2021, but later it
maintained a relatively stable Combined ratio, hovering around 1.0 to 1.6, suggesting
consistency in its combined financial and operating performance and it also indicated that the
company relies less on debt financing compared to other companies. Whirlpool, on the other
hand, also
experienced stability in its Combined ratio, ranging from 1.0 to 1.8, indicating financial stability
of performance over the years.
In summary, while Titan demonstrated fluctuating and high leverages, Ulta Beauty and
Whirlpool remained relatively stable, making it a preferable choice in terms of consistent
combined financial and operating performance over the analyzed period.
RATIO’S
Profitability Ratio’s FY 2020-2022 (Amt in crores)
Particulars 2022- 2021- 2020-

2023 2022 2021
Net Profit Margin (%) 1.91 2.27 4.18
(Net profit / Total
income)
Return on Net 6.79 7.43 10.69

worth/Equity(%)
(ROE)
Total Debt / Equity (x) 0.88 1.12 0.81
Asset turnover ratio (%) 1.19 1.04 84.54
Source: https://www.moneycontrol.com/financials/jktyreindustries/ratiosVI/JKT01#JKT01
Liquidity Ratio’s FY 2020-2022 (Amount in crores)
Particulars 2022- 2021- 2020-

2023 2022 2021
Current Ratio (X) 1.13 1.02 1.08
= Current assets / current

liabilities
Quick Ratio (X) 0.73 0.61 0.64
= Quick Assets / current

liabilities
Source: https://www.moneycontrol.com/financials/jktyreindustries/ratiosVI/JKT01#JKT01
Interest coverage Ratio’s FY 2020-2022 (Amount in crores)
FY 2022 FY 2021 FY 2020
EBIT Interest Interest EBIT Interest Interest EBIT Interest Interest

coverage coverage coverage
Ratio Ratio Ratio
564 258 2.18 490 230 2.13 640.62 266.27 2.40
Note: Interest coverage Ratio = EBIT / Interest expense
PE Ratio’s FY 2020-2022 (Amount in crores)
FY 2022 FY 2021 FY 2020
Market EPS PE Market EPS PE Market EPS PE

Price Ratio Price Ratio Price Ratio
share on share share
31/3/23 on on
31/3/22 31/3/21
158.15 7.45 21.2 128.4 7.43 17.2 121.6 10.42 11.6
Note: PE Ratio = Market Price share on current date / EPS

Source for market price share: https://finance.yahoo.com/quote/JKTYRE.BO/history?
period1=1585612800&period2=1680220
800&interval=1d&filter=history&frequency=1d&includeAdjustedClose=true
Profitability Ratio’s FY 2020-2022
Particulars 2022- 2021- 2020-

2023 2022 2021
Net Profit Margin (%) 16.10% 15.01% 3.76%
(Net profit / Tot income)
Return on common 71.1% 55.8% 9%

equity(%)
Total Debt / Equity (x) 1.12 1.41 0.95
Asset turnover ratio 1.98 1.72 1.17
Source: https://stockanalysis.com/stocks/ulta/financials/ratios/
Liquidity Ratio’s FY 2020-2022
Particulars 2022- 2021- 2020-

2023 2022 2021

Quick Ratio (X) 0.56 0.43 0.92
Interest Coverage Ratio’s FY 2020-2022
FY 2022 FY 2021 FY 2020

Ratio Ratio Ratio
1.638 0.049 33.42 1.297 0.016 81.06 0.236 0.057 4.14
PE Ratio’s FY 2020-2022
FY 2022 FY 2021 FY 2020

Price (consolidated) Ratio Price (consolidated) Ratio Price (consolidated) Ratio
Share Share Share
on on on
31/3/23 31/3/22 31/3/22
500.56 24.17 20.71 356.373 18.09 19.70 279.67 3.12 89.64
Source for market price share: https://finance.yahoo.com/quote/ULTA/history

Profitability Ratio’s FY 2020-2022 (Amount in crores)
Source:
https://www.moneycontrol.com/financials/whirlpoolindia/ratiosVI/WI#WI
Liquidity Ratio’s FY 2020-2022 (Amount in crores)
Particulars 2022- 2023 2021- 2022 2020- 2021
Quick Ratio (X) 1.18 1.26 1.41
Source: https://www.moneycontrol.com/financials/whirlpoolindia/ratiosVI/WI#WI
Interest coverage Ratio’s FY 2020-2022 (Amount in crores)
FY 2022 FY 2021 FY 2020

Ratio Ratio Ratio
25914 1250 20.73 32043 1472 21.76 46648 1534 30.41

PE Ratio’s FY 2020-2022 (Amount in crores)
FY 2022 FY 2021 FY 2020

Price Ratio Price Ratio Price Ratio
share on share share
31/3/23 On On
31/3/22 31/3/21
132.02 14.57 9.06 172.78 132.02 14.57 9.06 172.78 132.02
Source for market price share: Whirlpool Corporation (WHR) Stock Historical Prices & Data
- Yahoo Finance
2022-23 2021-22 2020-21
Particulars JK Ulta Whirlpool JK Ulta Whirlpool JK Ulta Whirlpool

Net Profit 1.91 16.1 2.97 2.27 15.01 3.71 4.18 3.76 5.64
Margin (%)
ROE (%) 6.79 71.1 5.95 7.43 55.8 7.48 10.69 9 11.8
Debt/Equity 0.88 1.12 0.03 1.12 1.41 0.04 0.81 0.95 0.01
Ratio (x)
Current 1.13 1.61 1.96 1.02 1.46 1.98 1.08 1.87 2.09
Ratio (x)
Quick Ratio 0.73 0.56 1.18 0.61 0.43 1.26 0.64 0.92 1.14
(x)
Asset 1.19 1.98 1.21 1.04 1.72 1.19 84.54 1.17 117.68
Turnover
Ratio (%)
Interest 2.18 33.42 20.73 2.13 81.06 21.76 2.40 4.14 30.41
coverage
Ratio
PE ratio 21.2 20.71 9.06 17.2 19.7 14.57 11.6 89.64 132.02
EPS ₹ 7.45 $24.1 ₹ 14.57 ₹ 7.43 $18.09 ₹ 17.56 ₹ 12.47 $ 3.12 ₹ 26.27
Comparing Titan, Ulta Beauty, and Whirlpool across 2020-21 and 2022-23 reveals significant
variations in financial performance. Titan lags behind several aspects such as Net profit margin,
ROE, EPS, liquidity ratios, and interest coverage ratio, compared to the other two companies.
Ulta Beauty consistently exhibits strong metrics, with high ROE, net profit margins, and EPS.
Its asset turnover also remained stable, it maintained solid investment turnover and current ratio.
While on the other hand, Whirlpool also consistently maintains stability in all aspects, with
stable ROE, net profit margins, EPS, and quick liquidity ratios. While Titan demonstrates
improvement in some areas, such as ROE, net profit margin, and Asset turnover ratio, its
overall performance remains inferior to other companies.
Ulta Beauty and Whirlpool emerge as the best choice due to its consistent profitability, robust
return ratios, and stable liquidity position. Investors seeking reliability and growth potential
would find Ulta Beauty and Whirlpool the most promising investment option among the three
companies.
CONCLUSION:
Ulta Beauty and Whirlpool emerge as the best investment choices among the three
companies. Both of them demonstrate consistent stability in financial performance, with strong
metrics and a focus on growth. While Whirlpool shows stability with low debt levels and a
commitment to returning earnings to shareholders. In contrast, Titan lags in several key
factors. Overall, investors seeking reliability and growth potential would find Ulta Beauty
and Whirlpool the most promising options.

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CIA 3

PROF. DR. GUPTESWAR PATEL

Saakshya Kulshreshtha (2320850)

TITAN COMPANY. (RETAIL SECTOR):

ULTA BEAUTY (RETAIL SECTOR):

Based in Benton Charter Township, Michigan, United States,

CAPITAL STRUCTURE (IN CRS)

Sources of 2022-2023 2021-2022 2020-2021

ANALYSIS OF CAPITAL STRUCTURE:

FY 2022 FY 2021 FY 2020

Debt Equity Debt- Debt Equity Debt- Debt Equity Debt-

2547.31 2889.22 0.88 2820.93 2526.10 1.12 1936.73 2398.39 0.81

Note: Debt Equity Ratio = Total debt / Total equity

equity, possibly for expansion or new projects, or managing working capital.

equity, possibly to reduce leverage, financial stability or optimize its finances.

Pecking order theory:

● Asymmetric information: Titan consistently chooses internal funding over

2022-2023 2021-2022 2020-2021

Debt-Equity Mix Ratio’s FY 2020-2022 (Amount in thousand $)

FY 2022 FY 2021 FY 2020

Debt Equity Debt- Debt Equity Debt- Debt Equity Debt-

2.21 1.96 1.12 2.16 1.53 1.41 1.91 2 0.95

Note: Debt Equity Ratio = Total debt / Total equity

to equity, possibly for expansion or new projects, or managing working capital.

Capitalization Related Theories:

Alignment with Ulta Beauty's Capital Structure:

□ Strategic Management of Financial Risk: Ulta Beauty's strategic balancing act in

Three Assumptions Aligned with Ulta Beauty's Practices and Implications:

Sources of 2022-2023 2021-2022 2020-2021

Whirlpool has maintained a steady capitalization of equity shares, demonstrating a stable

FY 2022 FY 2021 FY 2020

Debt Equity Debt- Debt Equity Debt Debt Equity Debt-

111.67 3106.66 0.03 133.69 2979.22 0.04 50.83 2823.16 0.01

Note: Debt Equity Ratio = Total debt / Total

environment where there is a constant return to scale and no economies or diseconomies

COMPANIES AND THEIR INDUSTRY COMPARISON:

2022-23 2021-22 2020-21

D/E JK Ulta Whirlpool JK Ulta Whirlpool JK Ulta Whirlpool

Equity 2889.22 1.96 3106.66 2526.1 1.53 2979.22 2398.39 2 2823.16

Cost of Debt (kd):

Before-tax Cost of Debt = Interest expense / Total Borrowings

From the Cash Flow Statement and Balance Sheet of FY21

Before tax Cost of Debt = 258,00,00,000/2547,31,00,000

❖ After Tax Cost:

After-tax Cost of Debt = Kdb * (1 – Tax Rate)

{Calculation of Tax rate –

100% Tax – 270 crores (EBT)

Cost of Equity = Earnings per share / Market price per share

Capital Structure Weights:

Weight of Debt = Total Debt / (Total Debt + Total Equity)

= 2547,31,00,000/ (2547,31,00,000+ 2889,22,00,000)

Weight of Equity = 1 - Weight of Debt

WACC = 5.7% (FY 2022-23)

Cost of Debt (kd):

Before-tax Cost of Debt = Interest expense / Total Borrowings

From the Cash Flow Statement and Balance Sheet of FY21

Before tax Cost of Debt = 230,00,00,000/2820,93,00,000

❖ After Tax Cost:

After-tax Cost of Debt = Kdb * (1 – Tax Rate)