20-05-2013, 03:49 PM
Profitability of Company by its Ratio Analysis Of Cadbury And nestle
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MEANING OF THE STUDY
• We know business is mainly concerned with the financial activities. In order to ascertain the financial status of the business every enterprise prepares certain statements, known as financial statements. Financial statements are mainly prepared for decision making purposes. But the information as is provided in the financial statements is not adequately helpful in drawing a meaningful conclusion. Thus, an effective analysis and interpretation of financial statements is required. The study refers to financial statement analysis. Analysis means establishing a meaningful relationship between various items of the two financial statements with each other in such a way that a conclusion is drawn. By financial statements we mean two statements .
SIGNIFICANCE OF THE STUDY
1. A useful tool in the hands of analyst:
Ratios are exceptionally useful tools with which one can infer the financial performance of the enterprise over a period of time, with the help of ratio analysis conclusions can be drawn regarding several aspects such as financial health profitability and operational efficiency of the undertaking.
2. Inter-Firm comparison:
Ratio analysis provides inter-firm comparison or comparison with industry averages by comparing the firms ratios with those of other competitive and progressive firms. An inter firm comparison exhibits the firms relative position its competitors.
3. Trend Analysis:
Ratio analysis enables a firm to take the time dimension into account. In other words, it facilitates the management to know whether the firms financial position is improving or deteriorating or is constant over the years by setting a trend with the help of ratios.
Cadbury India Ltd.
INTRODUCTION
The Cadbury’s Inc has taken the opportunity to offer us a broader view of chocolate category. The Cadbury India’s no.1 Chocolate is able to share with their market insights based upon unparalleled breath of chocolate experience.
Cadbury has grown from strength to strength with new technologies being introduced to make the Cadbury confectionary business, one of the most efficient in the world. The merge in 1969 with Schweppes and the subsequent development of the business have led to Cadbury Schweppes taking the led in both, the confectionary and soft drink market in tech UK and becoming a major force in the international market. Cadbury Schweppes today manufactures product in 60 countries and a trade in staggering 120. The Cadbury story is a fascinating story of a family business that grew in one of the biggest, most loved chocolate brand in the world. A story that you will remember as the story of “The taste of life”.
SAMPLING DESIGN
The sampling design is a fundamental part of data collection for scientifically based decision making. A well-developed sampling design plays a critical role in ensuring that data are sufficient to draw the conclusions needed. Process of selecting a number of units for a study in such a way that the units represent the larger group from which they are selected.
A sound, science-based decision is based on accurate information. To generating accurate information about the level of contamination in the environment, you should consider the following:
In my study I used simple random sampling method . Because it is a simplest method by using this, it is easy to collect data.
METHODS OF DATA COLLECTION
Data collection is a term used to describe a process of preparing and collecting data - for example as part of a process improvement or similar project. The purpose of data collection is to obtain information to keep on record, to make decisions about important issues, to pass information on to others. Primarily, data is collected to provide information regarding a specific topic.
Comparative Analysis of
Cadbury India Ltd. and Nestle India Ltd.
• Both companies have a gross profit ratio of more than 30 %. This is a decent percentage to account for the expenses which will be incurred before the net profit is ascertained.
• The expense ratio is lower for Nestle India Ltd. by almost half the amount. This indicates the amount of expenses under each head. The lesser the expenses occurred in sales, the greater the profitability of the company.
• The Net Profit Ratio indicates the profitability of the organization. There is not a major difference between the two companies chosen as they enjoy duopoly in their specific markets. Here as well, Nestle being a larger firm is leading the market with a 2 % advantage over Cadbury.
• Return on Capital employed and Return to shareholder’s funds are the indicators of profitability from the shareholder’s point of view. Nestle have the 3times more in each , so this will bring more share capital in the next year and better capital investments for the future.
• Earnings per share is the individual earning which a shareholder will receive on his investment in our company. The more the earnings per share, the better for the company. In our case, there is almost a 50 % increase in both companies which is a great investment for the shareholders.
• Current Ratio for both the firms is more than 1. This is perfect as the amount of assets should always be more than the total amount of liabilities for a business.
• The quick asset ratio has been taken as it is from the annual reports of the companies as there is not break up of the liabilities information available about the companies. Analyzing the found ratio, it is a good ratio as the amount of quick assets are comparable to the liquid liabilities.
• The proprietary ratio gives us the percentage of proprietor’s funds involved in the total funds of the company. This ratio should ideally be higher as it shows a stronger hold of the company. In our companies, Cadbury’s position is stronger as compared to Nestle when we consider the point of view of the proprietor. For Cadbury, its almost half of the total funds employed in the business.
• The debt equity ratio should be an optimum value for the business. A higher value would mean low sustainability of the company and lower value would indicate that external credit is not being employed in the company. For Nestle, this value is alarmingly low, as it has not utilized any outside credit which was at its disposition.
CONCLUSION
The Ratio analysis is an important tools for investors and many other parties who are interested in it to gain insight into a company and its operation. The balance sheet is a snapshot at a single point of time of the company’s accounts- covering its assets, liabilities and shareholder’s equity.