Project Report (Submitted for the Degree of B.Com.

Honours in
Accounting & Finance under the University of Calcutta)
FINANCIAL STATEMENT ANALYSIS OF
DABUR INDIA LTD. & ITC LTD.
Submitted by
Name of the Candidate : Kankana Nag
Registration Number : 034-1221-0526-13
Name of the College : Shri Shikshayatan College
College Roll Number : 155
Supervised by
Name of the Supervisor: Smt. Papiya Chaudhury
Name of the College: Shri Shikshayatan College
Month and Year of Submission
FEBRUARY 2016
~I~

Annexure I-A
Supervisor's Certificate
This is to certify that Miss Kankana Nag a student of B.Com Honours in
Accounting & Finance of Shri Shikshayatan College under the University of
Calcutta has worked under my supervision and guidance for her Project Work and
prepared a Project Report with the title FINANCIAL STATEMENT ANALYSIS
OF DABUR AND ITC which she is submitting, is her genuine and original work
to the best of my knowledge.
Place: Kolkata Signature:
Date: Name: Smt. Papiya Chaudhury
Designation: Associate Professor
Shri Shikshayatan College
~ II ~

Annexure I-B
Student's Declaration
I hereby declare that the Project Work with the title FINANCIAL
STATEMENT ANALYSIS OF DABUR & ITC submitted by me for the
partial fulfillment of the degree of B.Com. Honours in Accounting & Finance
under the University of Calcutta is my original work and has not been
submitted
earlier to any other University /Institution for the fulfillment of the
requirement
for any course of study. I also declare that no chapter of this manuscript in
whole or in part has been incorporated in this report from any earlier work
done
by others or by me. However, extracts of any literature which has been used
for
this report has been duly acknowledged providing details of such literature in
the references.
Signature:
Name: Kankana Nag
Address: AA-151, Sector 1, Salt Lake City, Kolkata-7000064
Registration Number: 034-1221-0526-13
Place: Kolkata
Date:
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ACKNOWLEDGEMENT
The success and final outcome of this project required a lot of guidance and
assistance from many individuals and I am extremely fortunate to have got this all
along the completion of my project work. Whatever I have done is only due to
such
guidance and assistance.
Firstly I would like to thank my supervisor Smt. Papiya Chaudhury for her
continuous support in this project, for pin pointing the errors and suggesting
necessary measures to debug them. I would also use this platform to express my
deep regards for our Head of the Department, Dr. Kajal Gandhi and Principal Dr.
Aditi Dey for being so helpful and considerate. Infact I was fortunate enough to get
constant encouragement, support and guidance from all the teaching staff of the
Commerce Department.
Apart from this I would also like to thank my friends, who gave me suggestions
and advices to do this project. Last but not the least I would like to thank my
family, my parents for educating me with the aspects of commerce, for their
unconditional support and encouragement to pursue my interest; my sister for
sharing her knowledge relating to this particular topic. I like to thank God for
giving me strength and capability, and also for helping me complete my project in
high perfection.
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SYNOPSIS
Financial statements are formal records of the financial activities of a business,
person, or other entity and provide an overview of a business or person's financial
condition in both short and long term. They give an accurate picture of a
company’s condition and operating results in a condensed form. Analysis and
interpretation of financial statements help in determining the liquidity position,
long term solvency, financial viability and profitability of a firm. It helps the
clients to decide in which firm the risk is less or in which one they should invest so
that maximum benefit can be earned.
The report at hand manifests an in-depth analysis of the financial statements of ITC
Ltd. and Dabur India Ltd. that caters to the fast moving consumer goods (FMCG)
segment of the national market. An attempt has been carried out in this study to
scrutinize the financial statements of the companies and justify whether
profitability is sufficient enough to determine the performance of a company. This
report comprises of a literature review which projects the perceptions of different
authors about the different ratios used to analyse the financial statements followed
by the analysis of the financial statements using financial ratios and ends with a
brief conclusion and recommendation.
The objective of this paper is: To understand, analyze and interpret the basic
concepts of financial statements of different FMCG companies, to interpret the
financial ratios and their significance, to study the solvency liquidity and
profitability position of these companies during the time span of 2011-2015.
The data used for the study is secondary data obtained from the web pages, as
disclosed by the 2 companies.
~V~
TABLE OF CONTENTS
Sl. No. Chapter Name Page
No.
Chapter 1 Introduction
➢ 1.1 Background of the study 1
➢ 1.2 Literature review 2
➢ 1.3 Research design 4
Chapter 2 Conceptual Framework
➢ 2.1 Concept 5
▪ 2.1.1 Steps in ratio analysis 5
▪ 2.1.2 Classification of Ratio 6
➢ 2.2 Benefits and Challenges 7
▪ 2.2.1 Importance of financial ratios 7
▪ 2.2.2 Limitations of financial ratios 9
Chapter 3 Analysis and Findings
➢ 3.1 Objectives
OF THE STUDY
Financial statements of the study 10
➢ 3.2Methodology 10
▪ 3.2.1 Sample 10
▪ 3.2.2 Data Type 11
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Sl. No. Chapter Name Page
No.
▪ 3.2.3 Data Source 12
▪ 3.2.4 Period of study 12
▪ 3.2.5 Tools used 12
➢ 3.3 Analysis and Findings 13
▪ 3.3.1 Current Ratio 13
▪ 3.3.2 Liquid Ratio 16
▪ 3.3.3 Absolute liquidity Ratio 19
▪ 3.3.4 Proprietary Ratio 22
▪ 3.3.5 Fixed Assets to Equity Ratio 25
▪ 3.3.6 Debt-Equity Ratio 28
▪ 3.3.7 Net Profit Ratio 31
▪ 3.3.8 Operating Profit Ratio 34
▪ 3.3.9 Return on Equity Ratio 37
▪ 3.3.10 Earnings per Share Ratio 40
Chapter 4 Conclusions and recommendations
➢ 4.1 Summary Observations 43
➢ 4.2 Recommendations for Improvement 44
➢ 4.3 Limitations of the Study 45
➢ 4.4 Scope for further Research 46
~ VII ~

1. INTRODUCTION
1.1 BACKGROUND are the mirror which reflects the financial position,
strength and weakness of the company. Financial statements of the company helps
to know how a business is doing and how it’s useful internally for a companystock
holders and to its board of directors, its managers and some employees
including labor unions, externally they are important to perspective investors, to
government agencies responsible for taxing and regulating, to lenders such as
banks and credit rating agencies & investment analysts & stock brokers. Financial
statement analysis involves careful selection of data from financial statements for
the primary purpose of forecasting the financial health of the company. This is
accomplished by examining trends in key financial data, comparing financial data
across companies, and analyzing key financial ratios. John N. Myres defines that
“Financial statement analysis is largely a study of relationships among the various
financial factors in a business, as disclosed by a single set of statements and a
study
of the trends of these factors as shown in a series of statements.”
Fast Moving Consumer Goods (FMCG), are the products that are sold quickly at
relatively low cost. Though the absolute profits made by FMCG companies are
relatively small, the goods generally sell in large quantities, so the cumulative
profits on such products can be large. Examples of FMCG generally include a wide
range consumer products such as toiletries, soap, cosmetics, teeth cleaning
products, detergents etc. India having a population of 1.252 billion as of 2013 is a
vital target market for Consumer Goods produced globally. Two of the most
significant Indian companies dealing in FMCG is inarguably ITC Ltd and Dabur
India Ltd. They cater to and touch the lives of 1 out of every 3 India through the
sale of their chain of consumer goods. Their equity shares are listed on Bombay
Stock Exchange, National Stock Exchange of India and Calcutta Stock Exchange.
Analysis and interpretation of the solvency, liquidity and profitability positions of
these companies in a comparative approach would aid the investors in taking
rational decisions
~-1-~
1.2 LITERATURE REVIEW
A brief discussion of the reviews of the previous researches related with study of
ratio analysis is being presented below:
Chen and Shimerda (1981) examined the financial ratios used in a number of early
studies for analysis and prediction of the financial soundness of the entities. They
noted that there was an abundant 41 different financial ratios which were found
useful in the earlier studies. They reconciled by judgement the factors in the earlier
studies into financial leverage, capital turnover, return on investment, inventory
turnover, receivables turnover, short-term liquidity, and cash position.
Martikainen (1993) classified financial ratios and tested their stability with
transformation analysis in a study identifying the key factors that determine stock
returns.
Elizabeth Duncan and Elliott (2004) he had pointed out that he had stated that the
paper in the title of efficiency, Customer service and financing performance among
Australian financial institutions showed that all financial performance measures as
interest margin, return on assets, and capital adequacy are Positively correlated
with customer service quality scores.
Jonas Elmerraji (2005) in his research article on financial performance had pointed
out that ratios can be an invaluable tool for making an Investment decision. Even
so, many new investors would rather leave their decisions to fate than try to deal
with the intimidation of financial ratios. The truth is that ratios aren't that
intimidating, Even if one doesn’t have a degree in business or finance. Using ratios
to make informed decisions about an investment makes a lot of sense, once one
knows how to use them.
Bull (2007) stated that financial ratio analysis help managers to analyse control and
improve an organisations operations. Credit analysts can use it to determine the
ability of an organisation to pay its debts and security analysts can use it to analyse
an organisations ability to pay interests on its bonds.
~-2-~
Besley and Brigham (2008) suggested that financial statement analysis may be
used to help predict the firm’s financial position in the future and to determine
expected earnings and dividends.
Frederic M. Scherer, (2008) examined how product innovation contributes to the
renewal of the firm through its dynamic and reciprocal relation with the firm’s
competences. Based on the notion that new products are created by linking
competences relating to technologies and customers, a typology is derived that
classifies new product projects based on weather a new product can draw on
existing competences. Following organizational learning these options are
conceptualized as exploitation and exploration. These organizational concepts are
used to gain a dynamic and path-dependent view of product innovation and
development, and to reveal the unique nature and challenges of different types of
product innovation.
Gibson (2010) said that investors and other external users of financial information
will often need to measure the performance and financial health of an organization.
This is done in order to evaluate the success of the business, determine any
weaknesses of the business, compare current and past performance, and compare
current performance with industry standards. Financially stable organizations are
desirable, because a financially stable business is one that successfully ensures its
ability to generate income for investors and retain or increase value
Rachchh Minaxi A (2011), in his research article on financial performance had
pointed & suggested that the financial statement analysis involves analyzing the
financial statements to extract information that can facilitate decision making. It is
the process of evaluating the relationship between component parts of the financial
statements to obtain a better understanding of an entity’s position and performance.
Priyaaks (Mar 2012), had stated that Financial statement analysis is the process of
examining relationships among financial statement elements and making
comparisons with relevant information. It is a tool in decision-making processes
related to stocks, bonds, and other financial instruments
~-3-~
From the above literature review, it is evident that, the financial performance
depicts the efficiency of organization. Along with that financial statements are very
useful for decision making in the company by Board of Directors and management.
It also helps to know the prosperity of the company with the profitability.
1.3 RESEARCH DESIGN
Chapter 2 : Conceptual Framework
Chapter 3 : Analysis and Findings
Chapter 4 : Conclusion and Recommendations
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2. CONCEPTUAL FRAMEWORK
2.1 CONCEPT
The major tool of analysis of financial statements of companies is RATIO
ANALYSIS. Financial ratios are mathematical comparisons of financial statement
accounts or categories. These relationships between the financial statement
accounts help investors, creditors, and internal company management understand
how well a business is performing and areas of needing improvement. Ratios are
easy to understand and simple to compute. They can also be used to compare
different companies in different industries. Since a ratio is simply a mathematically
comparison based on proportions, big and small companies can be use ratios to
compare their financial information. In a sense, financial ratios don't take into
consideration the size of a company or the industry. Ratios are just a raw
computation of financial position and performance.
Ratios allow us to compare companies across industries, big and small, to identify
their strengths and weaknesses. Financial ratios are often divided up into seven
main categories: liquidity, solvency, efficiency, profitability, market prospect,
investment leverage, and coverage.
2.1.1 STEPS IN RATIO ANALYSIS:-
The ratio analysis requires two steps:
• Calculation of ratio
• Comparing the ratio with some predetermined standards. The standard ratio
may be the past ratio of the same firm or industry’s average ratio or the ratio
of the most successful firm in the industry. In interpreting the ratio of a
particular firm, the analyst cannot reach any fruitful conclusion unless the
~-5-~
calculated ratio is compared with some predetermined standard. The
importance of a correct standard is oblivious as the conclusion is going to be
based on standard itself.
2.1.2 CLASSIFICATION OF RATIO
BASED ON FINANCIAL STATEMENT
Accounting ratios express the relationship between figures taken from financial
statements. Figures may be taken from Balance Sheet, P&L A/C, or both. One-way
of classification of ratio is based upon the sources from which are taken.
BALANCE SHEET RATIO: Balance sheet is the financial statement that provides
a picture of a company’s financial position by listing a company’s assets, liabilities
and shareholder’s equity. Income statement and cash flows statement provides
information about profitability and cash flows.
A financial ratio determines relationship between two components. These may
include:
Balance Sheet Ratio
Based on Financial Statement
Financial Ratios
Liquidity Ratios
~-6-~
Solvency Ratios
Based on functions
Profitability Ratios

Two ▪
balance sheet components, i.e. assets, liabilities and shareholders’ equity
▪
Two income statement components, i.e. sales, gross profit, net income, etc.
▪
A balance sheet component and an income statement component
▪
An income statement component and a cash flows statement component
▪
A balance sheet component and a cash flows statement component
A balance sheet ratio belongs to the first category, i.e. it includes either two classes
of assets, assets and liabilities, assets and shareholders equity, liabilities and share
holders equity.
BASED ON FUNCTIONS
LIQUIDITY RATIOS: It shows the relationship between the current assets and
current liabilities of the concern. E.g. liquid ratios and current ratios.
SOLVENCY RATIOS: It shows the relationship between proprietor’s funds and
debts used in financing the assets of the concern. E.g. Capital Gearing ratio, debt
equity ratio & proprietary ratio.
PROFITABILITY RATIOS: Shows the relationship between profit & sales. E.g.
Operating ratios, gross profit ratio, operating net profit ratio, etc.
2.2 BENEFITS AND CHALLENGES
2.2.1 IMPORTANCE:
As a tool of financial management, ratios are of crucial significance. The
importance of ratio analysis lies in the fact that it presents facts on a comparative
basis & enables the drawing of interference regarding the performance of a firm.
Ratio analysis is relevant in assessing the performance of a firm in respect of the
following aspects:
~-7-~

1. Liquidity position: Ratio analysis helps in determining the liquidity position of

the firm. A firm can be said to have the ability to meet its current obligations when
they become due. It is measured with the help of liquidity ratios.
2. Long term solvency: Ratio analysis is equally useful for assessing the long term
financial viability of a firm. This respect of the financial position of a borrower is
of concern to the long term creditors, security analyst & the present & potential
owners of a business. The long term solvency is measured by the leverage/capital
structure & profitability ratio.
3. Operating efficiency: The various activity ratios measure this kind of operational
efficiency. In fact, the solvency of a firm is in the ultimate analysis dependent upon
the sales revenues generated by the use of its assets- total as well as its
components.
4. Overall profitability: The management is constantly concerned about overall
profitability of the enterprise. That is, they are concerned about the ability of the
firm to meets its short term as well as obligations to its creditors. This is possible if
an integrated view is taken & all the ratios are considered together.
5. Inter firm comparison: An inter firm comparison would demonstrate a firms
position vice-versa its competitors. If the results are at variance either with the
industry average or with those of the competitors, the firm can seek to indentify the
probable & in light. Take remedial measure.
~-8-~

6. Trend analysis: Finally, ratio analysis enables a firm to take the time dimension
into account. In other words, whether the financial position of a firm is improving
or deteriorating over the years. This is made possible by the use of trend analysis.
2.2.2 LIMITATIONS:
1. Historical Results: All of the information used in ratio analysis is derived from
actual historical results. This does not mean that the same results will carry
forward
into the future.
2. Inflation: If the rate of inflation has changed in any of the periods under review,
this can mean that the numbers are not comparable across periods.
3. Operational changes: A company may change its underlying operational
structure to such an extent that a ratio calculated several years ago and compared to
the same ratio today would yield a misleading conclusion.
4. Accounting policies: Different companies may have different policies for
recording the same accounting transaction. This means that comparing the ratio
results of different companies may be like comparing apples and oranges.
5. Company strategy: It can be dangerous to conduct a ratio analysis
comparison between two firms that are pursuing different strategies.
In short, ratio analysis has a variety of limitations that can limit its usefulness. But
as long as one is aware of these problems it’s an useful tool.
~-9-~

3. ANALYSIS AND FINDINGS

3.1 OBJECTIVES OF STUDY
▪ To analyse the financial performances of the companies through relevant
financial analysis.
▪ To study the growth profile of the companies during the study period.
▪ To appraise the financial soundness of the companies - Dabur India Ltd. and
ITC
Ltd.
▪ To provide valuable suggestions and recommendations to the companies.
3.2 METHODOLOGY
3.2.1 Sample (Company Profiles)
ITC Limited or ITC is an Indian conglomerate headquartered in Kolkata, West
Bengal. Its diversified business includes five segments: Fast Moving Consumer
Goods (FMCG), Hotels, Paperboards & Packaging, Agricultural Business &
Information Technology. Established in 1910 as the Imperial Tobacco Company of
India Limited, the company was renamed as the Indian Tobacco Company Limited
in 1970 and further to I.T.C. Limited in 1974. The periods in the name were
~ - 10 - ~

removed in September 2001 for the company to be renamed as ITC Ltd. The
company completed 100 years in 2010 and as of 2012-13, had an annual turnover
of US$8.31 billion and a market capitalization of US$45 billion. It employs over
25,000 people at more than 60 locations across India and is part of Forbes 2000
list.
Dabur (Dabur India Ltd.) (Devanagari: derived from Daktar Burman) is the fourth
largest Fast Moving Consumer Goods (FMCG) company in India with
consolidated Revenues of over INR 7,800 Crores and Market Capitalisation of
over
INR 46,600 Crore (at the end of 2014-15). Building on a legacy of over 130 years,
Dabur is today India’s most trusted name and the world’s largest Ayurvedic
medicine & related products manufacturer and Natural Health Care Company.
Today, Dabur has a portfolio of over 381 trusted products spread across 21
categories and over 1,000 SKUs. Dabur was founded in 1884 by Dr. S. K. Burman,
a physician in West Bengal, to produce and dispense Ayurvedic medicines.
3.2.2 Data Type
The data used in this study is secondary. Due to the busy schedule of the high
officials of the companies the collection of primary data was not possible.
~ - 11 - ~

3.2.3 Data Source

Data have been collected from the websites of both the companies and their
annual reports
3.2.4 Period of Study
Financial year 2011-12 to 2014-15
3.2.5 Tools Used
The tools used for analysis and graphical representation are Bar Graphs, Linear
graphs, pie charts created with the help of MS Word.
~ - 12 - ~
3.3 Analysis and Findings
3.3.1 CURRENT RATIO
The ratio compares the current assets to current liabilities. It is also known as working capital
ratio or ‘solvency ratio’. The ideal current ratio for a company is 2:1.
CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES

ITC
TABLE 1 CURRENT RATIO OF ITC
YEAR CURRENT
ASSETS
CURRENT LIABILITIES
CURRENT RATIO
2011- 2012 15801.45 9304.00 1.69
2012-2013 17591.47 10330.73 1.70
2013-2014 22581.06 11886.06 1.89
2014-2015 23955.03 11681.91 2.05
SOURCE : BALANCE SHEETS OF ITC LTD.
2.5
2.05 2
1.69 1.7
1.89
1.5
0
2011- 2012 2012-2013 2013-2014 2014-2015
GRAPH 2 CURRENT RATIO OF ITC
2011- 2012
2012-2013 1
2013-2014
0.5
2014-2015
~ - 13 - ~

DABUR
TABLE 3 CURRENT RATIO OF DABUR
YEAR
CURRENT ASSETS
CURRENT LIABILITIES
CURRENT RATIO
2011- 2012 1630.62 1077.42 1.51
2012-2013 1737.39 1158.44 1.49
2013-2014 1969.85 1136.68 1.73
2014-2015 1572.32 1259.03 1.25
SOURCE: BALANCE SHEETS OF DABUR INDIA LTD.

CURRENT RATIO DABUR

1.73 1.8
1.6
1.51 1.49
1.4
1.25
1.2
1
0.8
0.6
0.4
0.2
0
2011- 2012 2012-2013 2013-2014 2014-2015
GRAPH 2 CURRENT RATIO OF DABUR
~ - 14 - ~
INTERPRETATION OF CURRENT RATIO
In Graph 1 (ITC) the current ratio is increasing from 1.69 in year 2011-12 to 2.05 in year
2014-15. So it can be said that the company has reached ideal current ratio in 2014-15. . It
indicates that company current ratio is in a stronger position and the company has sufficient cash
liquidity to meet its short-term liquidity. Whereas in Graph 2 (Dabur) the current ratio is
decreasing from 1.51 in year 2011-12 to 1.25 in the year 2014-15 which is 1.5 times lower than
that of ITC Ltd. on an average. Thus a higher current ratio is preferable.
2.5
2.05 2
1.73
1.5
1.51
1.49
1.25
1
0.5
0
2011- 2012 2012-2013 2013-2014 2014-2015
GRAPH 3: COMPARING THE CURRENT RATIOS OF THE TWO COMPANIES ITC & DABUR
1.69 1.7
CURRENT RATIO ITC
~ - 15 - ~
1.89
CURRENT RATIO Dabur
3.3.2 LIQUID RATIO
Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compares quick assets
with quick liabilities. The ideal liquid ratio is 1:1.
LIQUID RATIO= QUICK ASSETS / QUICK LIABILITIES

ITC
TABLE 3 LIQUID RATIO OF ITC
YEAR CASH AND
CASH EQUIVALENT
SHORTTERM INVESTMENT
ACCOUNTS RECEIVABLE
CURRENT LIABILITIES
QUICK RATIO
2011-12 3130.12 465.98 1203.84 9304.00 0.51
2012-13 3615.00 512.12 1163.34 10330.73 0.51
2013-14 3490.19 816.12 2439.21 11886.06 0.56
2014-15 7588.61 549.89 1722.40 11681.91 0.84
SOURCE: BALANCE SHEETS OF ITC LTD.
0.9 0.8
LIQUID RATIO
0.7 0.6 0.5
2011-12 2012-13 2013-14 2014-15
GRAPH 4 LIQUID RATIO OF ITC 0.4
0.84
0.3 0.2 0.1 0
0.51 0.51
~ - 16 - ~
0.56
DABUR
TABLE 4 LIQUID RATIO OF DABUR
YEAR CASH AND
CASH EQUIVALENT
SHORTTERM
ACCOUNTS INVESTMENT
RECEIVABLE
QUICK RATIO
2011-12 291.29 141.33 224.17 1077.42 0.60
2012-13 319.40 116.53 255.32 1158.44 0.59
2013-14 297.47 84.62 323.12 1136.68 0.62
2014-15 123.94 114.08 338.79 1259.03 0.46
SOURCE: BALANCE SHEETS OF DABUR LTD.
GRAPH 5 LIQUID RATIO OF DABUR
~ - 17 - ~
LIQUID RATIO
0.7
0.6
0.5
0.4
0.3
0.62
0.2
0.46
0.1
0
2011-12 2012-13 2013-14 2014-15
0.6 0.59
CURRENT LIABILITIES
INTERPRETATION OF LIQUID RATIO
In general, higher quick ratio is preferable than lower ratio. From the data above, in Graph 4
(ITC) the liquid ratio is increasing from 0.51 in year 2011-12 to 0.84 in year 2014-15. Whereas
in Graph 4 (Dabur) the liquid ratio is decreasing from 0.6 in year 2011-12 to 0.46 in the year
2014-15. The comparison between the years 2013-14 and 2014-15 reveals that their (Dabur’s)
quick ratio has substantially decreased during the particular year. So it indicates that the
industry’s profit margin was not so high that they could make some investments paying off the
liabilities that could result in an increase in assets and decrease in liabilities to make the liquidity
position far better.
QUICK RATIO ITC
QUICK RATIO DABUR 0.9
0.8
0.6
0.84
0.7
0.59 0.62
0.6
0.51
0.5
0.51
0.56
0.46
0.4
0.3
0.2
0.1
0
2011-12
2012-13
2013-14
2014-15
GRAPH 4 COMPARING THE QUICK RATIOS OF TWO COMPANIES ITC & DABUR
~ - 18 - ~
3.3.3 ABSOLUTE LIQUIDITY RATIO
It is a variation of quick ratio. Absolute liquidity ratio measures relationship between cash and
near cash items on one hand immediately maturing obligation on the other. The ideal Absolute
quick ratio is 0.75:1.
ABSOLUTE LIQUIDITY RATIO= (CASH + MARKETABLE SECURITIES) /
CURRENT LIABILITIES ITC
TABLE 5 ABSOLUTE LIQUIDITY RATIO OF ITC YEAR CASH & CASH EQUIVALENTS
CURRENT LIABILITIES
ABSOLUTE LIQUIDITY RATIO 2011-12 3130.12
9304.00
0.37
2012-13 3615.00
10330.73
0.35
2013-14 3490.19
11886.06
0.29
2014-15 7588.61
11681.91
0.65
SOURCE: BALANCE SHEETS OF ITC LTD.
ABSOLUTE LIQUIDITY RATIO ITC
GRAPH 7 ABSOLUTE LIQUIDITY RATIO OF ITC
0.65 0.7
0.6
0.5
0.37
0.35 0.4
0.29
0.3
0.2
0.1
0
2011-12 2012-13 2013-14 2014-15
~ - 19 - ~
DABUR
TABLE 6 ABSOLUTE LIQUIDITY RATIO OF DABUR
YEAR CASH & CASH EQUIVALENTS
CURRENT LIABILITIES
ABSOLUTE LIQUIDITY RATIO 2011-12 291.29
1077.42
0.27
2012-13 391.40
1158.44
0.34
2013-14 297.47
1136.68
0.26
2014-15 123.94
1259.03
0.11
SOURCE: BALANCE SHEETS OF DABUR LTD.
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
GRAPH 8 ABSOLUTE LIQUIDITY RATIO OF DABUR
~ - 20 - ~
ABSOLUTE 0.34
LIQUIDITY RATIO OF DABUR
0.27
0.26
0.11
2011-12 2012-12 2013-14 2014-15
INTERPRETATION OF ABSOLUTE
LIQUIDITY RATIO
On comparing the Absolute liquidity Ratio of both the companies ITC and Dabur we can
conclude that ITC’s Absolute liquidity Ratio increased to 0.65 in 2014-15 from 0.37 in
2011-12, though in 2013-14 there was a drop but it managed to climb back the next year.
Where as in case of Dabur after a rise in 2012-13 it kept falling and in 2014-15 the fall
was much drastic to 0.11.
0.7
0.6
0.65
0.5
0.4
0.37
0.27
0.35
0.34
0.26 0.3
0.29 0.2
0.1
0.11
0
2011-12
2012-13
2013-14
2014-15
GRAPH 5 COMPARING THE ABSOLUTE LIQUIDITY RATIO OF TWO COMPANIES ITC &DABUR
~ - 21 - ~
ABSOLUTE LIQUIDITY RATIO ITC
ABSOLUTE LIQUIDITY RATIO DABUR
3.3.4 PROPRIETARY RATIO
Proprietary ratio is a test of financial and credit strength of the business. It relates shareholders
fund to total assets. This ratio determines the long term or ultimate solvency of the company.
PROPRIETARY RATIO= SHAREHOLDER’S FUND / TOTAL ASSESTS

ITC
TABLE 7 PROPRIETARY RATIO OF ITC
YEAR SHAREHOLDER’S
TOTAL ASSETS PROPRIETARY FUND
RATIO 2011-12
19458.58 30079.77 0.65 2012-13 22287.67 34017.43 0.66 2013-14 27236.96 40883.93 0.67
2014-15 30735.69 44195.66 0.70
SOURCE: BALANCE SHEETS OF ITC LTD.

PROPRIETARY RATIO
0.70
0.70
0.69
0.68
0.67
0.67
0.66
0.65
0.66
0.65
0.64
0.63
0.62
2011-12 2012-13 2013-14 2014-15
GRAPH 6 PROPRIETARY RATIO OF ITC
~ - 22 - ~
DABUR
TABLE 8 PROPRIETARY RATIO OF DABUR
SHAREHOLDER’S YEAR
FUND
TOTAL ASSETS PROPRIETARY
RATIO 2011-12
1303.27 2840.71 0.46
2012-13 1594.78 2827.89 0.56 2013-14 1902.34 3121.80 0.61 2014-15 2336.1 3688.36 0.63
SOURCE: BALANCE SHEETS OF DABUR LTD.

PROPRIETARY RATIO
0.70
0.61
0.63
0.60
0.56
0.50
0.46
0.40
0.30
0.20
0.10
0.00
2011-12 2012-13 2013-14 2014-15
GRAPH 7 PROPRIETARY RATIO OF DABUR
~ - 23 - ~
INTERPRETATION OF PROPRIETARY
RATIO
Higher the net worth ratio better the long term solvency position of the company. From Graph 10
(ITC) it is evident that the ratio is conistently increasing during the period. In 2011-12 it stood at
0.65 and in 2014-15 it has reached 0.7. In case of Dabur (Graph 11) it can be inferred that the
ratios have been lower on an average but the growth from 2011- 12 to 2014-15 is substantial
with a total increase of 1.37 times. This ratio indicates the extent to which the assets of the
company can be lost without affecting the interest of thecreditors of the company
0.8
0.65 0.46
0.66 0.56
0.67
0.61
0.7
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2011-12 2012-13 2013-14 2014-15
GRAPH 8 COMPARISON OF PROPRIETARY RATIO OF ITC & DABUR
0.63
PROPRIETARY RATIO ITC PROPRIETARY RATIO DABUR
~ - 24 - ~
3.3.5 FIXED ASSETS TO EQUITY RATIO
Fixed assets to equity ratio measures the contribution of stockholders and the contribution of
debt sources in the fixed assets of the company. Other names of this ratio are fixed assets to net
worth ratio and fixed assets to proprietors fund ratio. If fixed assets to stockholders’ equity ratio
is more than 1, it means that stockholders’ equity is less than the fixed assets and the company is
using debts to finance a portion of fixed assets. If the ratio is less than 1, it means that
stockholders’ equity is more than the fixed assets and the stockholders’ equity is financing not
only the fixed assets but also a part of the working capital. Generally a ratio of 0.60 to 0.70 is
considered satisfactory.
FIXED ASSETS TO EQUITY RATIO = FIXED ASSETS / STOCK HOLDERS
EQUITY ITC
TABLE 9 FIXED ASSETS TO EQUITY RATIO YEAR FIXED ASSETS STOCK HOLDER’S
EQUITY
FIXED ASSETS TO EQUITY RATIO 2011-12 12095.42 19615.67 0.62
2012-13 12697.13 22288.58 0.57
2013-14 15747.20 27439.99 0.58
2014-15 16292.63 30735.69 1.8
SOURCE: BALANCE SHEETS OF ITC LTD.

FIXED ASSETS TO EQUITY RATIO ITC

GRAPH9 FIXED ASSETS TO EQUITY RATIO
1.8 1.8 1.6 1.4 1.2 1 0.8
0.62 0.6
0.57 0.58
0.4 0.2 0
2011-12 2012-13 2013-14 2014-15
~ - 25 - ~

0.46 0.5
0.4
0.39
0.35
0.3
0.29
0.2
0.1
0
2011-12
2012-13
2013-14
2014-15
FIXED ASSETS TO EQUITY RATIO DABUR
DABUR
TABLE 10 FIXED ASSETS TO EQUITY RATIO OF DABUR
YEAR FIXED ASSETS STOCK HOLDER’S
EQUITY
FIXED ASSETS TO EQUITY RATIO
2011-12 596.91 1303.27 0.46 2012-13 633.65 1594.78 0.39 2013-14 670.38
1902.34 0.35 2014-15 694.74 2336.19 0.29
SOURCE: BALANCE SHEETS OF DABUR LTD.
GRAPH 10 FIXED ASSETS TO EQUITY RATIO
~ - 26 - ~

INTERPRETATION OF FIXED ASSETS TO

EQUITY
RATIO
An analysis of Graph 13 (ITC) conveys that this ratio has always been ‘satisfactory’ that is above
0.60 times. Although it has dropped between the years 2012 to ’14, it climbed up to a massive
1.8 times in the financial year 2014-15. It means that stockholders’ equity is less than the fixed
assets and the company is using debts to finance a portion of fixed assets. Contradictorily
Dabur’s FA to Equity Ratio (in Graph 14) is seen to be decreasing continuously and it has
dropped to a mere 0.29 in the F.Y. 2014-15, 6.2 times lower than that of ITC. Since it has
always been much lower than unity , it means that stockholders’ equity of Dabur is more than the
fixed assets and the stockholders’ equity is financing not only the fixed assets but also a part of
the working capital.
2014-15
2013-14
0.58
2012-13
0.57
2011-12
0.62
GRAPH 11 COMPARISON OF FIXED ASSETS TO EQUITY RATIO OF DABUR &ITC
0
0.5
1
1.5
2
0.29
1.8
0.35
FIXED ASSETS TO STOCKHOLDER’S EQUITY RATIO DABUR
0.39
FIXED ASSETS TO STOCKHOLDER’S
0.46
EQUITY RATIO ITC
~ - 27 - ~

3.3.6 DEBT- EQUITY RATIO

Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage,
calculated by dividing a company’s total liabilities by its stockholders' equity. The D/E ratio
indicates how much debt a company is using to finance its assets relative to the amount of value
represented in shareholders’ equity. For most companies the maximum acceptable debt-to-equity
ratio is 1.5-2 and less. For large public companies the debt-to-equity ratio may be much more
than 2, but for most small and medium companies it is not acceptable.
DEBT - EQUITY RATIO = TOTAL LIABILITIES / SHAREHOLDERS' EQUITY

ITC
TABLE 11 DEBT-EQUITY RATIO OF ITC YEAR TOTAL
LIABILITIES SHAREHOLDERS'
EQUITY
DEBT- EQUITY RATIO
2011-12 10464.1 19615.67 0.53 2012-13 11728.6 22288.58 0.54 2013-14 13443.94 27439.99
0.49
2014-15 13459.97 30735.69 0.44
SOURCE: BALANCE SHEETS OF DABUR LTD.

DEBT- EQUITY RATIO ITC

0.6
0.54
0.5
0.49
0.44
0.4
0.3
0.2
0.1
0
2011-12 2012-13 2013-14 2014-15
GRAPH 12 DEBT EQUITY RATIO OF ITC
0.53
~ - 28 - ~
DEBT- EQUITY RATIO ITC

DABUR
TABLE 12 DEBT EQUITY RATIO OF DABUR
YEAR TOTAL
LIABILITIES
SHAREHOLDERS' EQUITY
DEBT- EQUITY RATIO
2011-12 1537.44 1303.27 1.18
2012-13 1233.11 1594.78 0.77 2013-14 1219.46 1902.34 0.64
2014-15 1352.17 2336.19 0.58
SOURCE: BALANCE SHEETS OF DABUR LTD.

DEBT- EQUITY RATIO DABUR

1.18 1.2
1
0.77 0.8
0.64
0.58
0.6
0.4
0.2
0
2011-12 2012-13 2013-14 2014-15
GRAPH 17 DEBT EQUITY RATIO OF DABUR
~ - 29 - ~

INTERPRETATION OF DEBT-EQUITY
RATIO
In Graph 16, the debt to equity ratio of ITC ltd. in 2011-12 (at 1.18 times) can be called
unsatisfactory as a higher ratio indicates that the outside debts or liabilities are more than the
shareholders’ funds, further indicating that the state of long term creditors are more and financial
structure is a bit weak. Although in the subsequent years the ratio has dropped and reached its
lowest at 0.58 in 2014-15 to an acceptable level. Dabur’s position in terms of Debt and Equity
(In Graph 17) is more or less consistent throughout these years with a slight drop towards the last
two financial years.
1.4
1.2
1.18
1
0.8
0.77
0.6
0.64 0.53 0.54
0.49
0.58
0.4
0.44
0.2
0
2011-12 2012-13 2013-14 2014-15
GRAPH 13 COMPARISON OF DEBT EQUITY SHARE BETWEEN DABUR AND ITC
~ - 30 - ~
DEBT- EQUITY RATIO ITC
DEBT- EQUITY RATIO DABUR

3.3.7 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.
For the purpose of this ratio, net profit is equal to gross profit minus operating expenses and
income tax. All non-operating revenues and expenses are not taken into account because the
purpose of this ratio is to evaluate the profitability of the business from its primary operations.
There is no norm to interpret this ratio. To see whether the business is constantly improving its
profitability or not, the analyst should compare the ratio with the previous years’ ratio, the
industry’s average and the budgeted net profit ratio. The use of net profit ratio in conjunction
with the assets turnover ratio helps in ascertaining how profitably the assets have been used
during the period.
NET PROFIT RATIO = NET PROFIT AFTER TAX / NET SALES

ITC
TABLE 13 NET PROFIT RATIO OF ITC YEAR NET PROFIT AFTER TAX
NET SALES NET PROFIT
RATIO 2011-12
6322.39 26179.52 0.24 2012-13 7418.39 29605.58 0.25
2013-14 8990.62 34948.70 0.26 2014-15 9607.73 36083.21 0.26
SOURCE: PROFIT AND LOSS STATEMENT OF ITC LTD.

NET PROFIT RATIO ITC

0.265
0.26 0.26 0.26
0.255
0.25
0.245
0.24
0.235
0.23
2011-12 2012-13 2013-14 2014-15
GRAPH 14 NET PROFIT RATIO OF ITC
0.24
0.25
~ - 31 - ~

DABUR
TABLE 14 NET PROFIT RATIO OF DABUR
YEAR NET PROFIT AFTER TAX
NET SALES NET PROFIT
RATIO
2011-12 463.24 3759.33 0.12
2012-13 590.98 4349.39 0.14
2013-14 672.10 4870.08 0.14
2014-15 762.58 5431.28 0.14
SOURCE: PROFIT AND LOSS STATEMENTS OF DABUR LTD.

NET PROFIT RATIO DABUR

0.14
0.14
0.14
0.14
0.135
0.13
0.125
0.12
0.12
0.115
0.11
2011-12 2012-13 2013-14 2014-15
GRAPH 15 NET PROFIT RATIO OF DABUR
~ - 32 - ~
INTERPRETATION OF NET PROFIT RATIO
From 0.24 times in 2011-12 the NP margin of ITC has increased to 0.26 with an average growth
rate of 4.15% each year. Although it is not huge, it indicates a positive advancement. In contrast
to ITC’s figures the Net Profi Ratios of Dabur (Graph 2.1) have been almost 0.5 times lower.
Further the ratio has elevated during the 1st year but subsequently been stagnant at 0.14 from FY
2012-13 to 2014-15. The constant net margin rate does not denote the company is improving its
profitability but also does not show any decline. However a higher growth rate is anticipated.
0.3
0.24
0.25
0.26
0.26
0.25
0.2
0.15
0.12
0.14 0.14
0.14
0.1
0.05
0
2011-12 2012-13 2013-14 2014-15
GRAPH 16 COMPARISON OF NET PROFIT RATIO OF DABUR & ITC
~ - 33 - ~
NET PROFIT RATIO ITC
NET PROFIT RATIO DABUR
3.3.8 OPERATING PROFIT RATIO
The operating profit ratio indicates how much profit a company makes after paying for
variable costs of production such as wages, raw materials, etc. It is expressed as a percentage of
sales and shows the efficiency of a company controlling the costs and expenses associated with
business operations. The operating profit margin ratio is a key indicator for investors and
creditors to see how businesses are supporting their operations. If a company requires both
operating and non-operating income to cover the operation expenses, it shows that the business'
operating activities are not sustainable. A higher operating margin is more favorable compared
with a lower ratio because this shows that the company is making enough money from its
ongoing operations to pay for its variable costs as well as its fixed costs.
OPERATING PROFIT RATIO = OPERATING PROFIT / NET SALES

ITC
TABLE 15 OPERATING PROFIT RATIO OF ITC
YEAR OPERATING
PROFIT
NET SALES OPERATING
PROFIT RATIO 2011-12
9168.15 26179.52 0.35 2012-13 10684.18 29605.58 0.36 2013-14 13051.55 34948.70 0.37
2014-15 13997.52 36083.21 0.39
SOURCE: PROFIT AND LOSS STATEMENTS OF ITC LTD.

OPERATING PROFIT RATIO ITC

0.4 0.39 0.38 0.37 0.36 0.35 0.34 0.33 0.32
2011-12 2012-13 2013-14 2014-15
GRAPH 17 OPERATING PROFIT RATIO OF ITC
~ - 34 - ~
OPERATING PROFIT RATIO ITC
DABUR
TABLE 16 OPERATING PROFIT RATIO OF DABUR
YEAR OPERATING
PROFIT
NET SALES OPERATING
PROFIT RATIO
2011-12 631.92 3759.33 0.17 2012-13 749.67 4349.39 0.17 2013-14 862.05 4870.08 0.18
2014-15 976.53 5431.28 0.18
SOURCE: PROFIT AND LOSS STATEMENTS OF DABUR LTD.

OPERATING PROFIT RATIO DABUR 0.185

0.18
0.175
0.17
0.165
0.16
0.155
2011-12 2012-13 2013-14 2014-15
GRAPH 18 OPERATING PROFIT RATIO OF DABUR
~ - 35 - ~
OPERATING PROFIT RATIO DABUR
Poly. (OPERATING PROFIT RATIO DABUR)

INTERPRETATION OF OPERATING PROFIT

RATIO
On comparing the Operating Profit Ratio of both the companies ITC and Dabur we can conclude
that ITC’s Operating Profit Ratio increased to 0.39 in 2014-15 from 0.35 in 2011-12 ; and
Dabur’s from 0.17 in 2011-12 to 0.18 in 2014-15. ITC’s higher margins indicates that the
company is making more money from its ongoing operations to pay for its variable costs as well
as its fixed costs than that of Dabur. Also the rate of increase of this ratio is a bit sluggish in case
of Dabur.
0.4
0.35
0.36
0.37
0.39
0.35
0.3
0.25
0.17 0.17
0.18 0.18
0.2
0.15
0.1
0.05
0
2011-12 2012-13 2013-14 2014-15
GRAPH 19 COMPARISON OPERATING PROFIT RATIO OF DABUR & ITC
OPERATING PROFIT RATIO ITC OPERATING PROFIT RATIO DABUR
~ - 36 - ~

ITC
3.3.9 RETURN ON EQUITY RATIO
Return on equity or return on capital is the ratio of net income of a business during a year to its
stockholders' equity during that year. It is a measure of profitability of stockholders' investments.
It shows net income as percentage of shareholder equity. Net income is the after tax income
whereas average shareholders' equity is calculated by dividing the sum of shareholders' equity at
the beginning and at the end of the year by 2. Return on equity is an important measure of the
profitability of a company. Higher values are generally favorable meaning that the company is
efficient in generating income on new investment. Investors should compare the ROE of
different companies and also check the trend in ROE over time. However, relying solely on ROE
for investment decisions is not safe. It can be artificially influenced by the management.
RETURN ON EQUITY RATIO = NET INCOME / SHAREHOLDERS’ EQUITY
TABLE 17 RETURN ON EQUITY RATIO OF ITC YEAR NET INCOME
SHAREHOLDERS'
EQUITY
RETURN ON EQUITY RATIO 2011-12 6258.14 19615.67 0.32 2012-13 7418.39 22288.58
0.33 2013-14 8891.38 27439.99 0.32 2014-15 9607.73 30735.69 0.31
SOURCE: BALANCE SHEET AND P/L STATEMENT OF ITC LTD
0.335
0.33
0.33
0.325
0.32
0.32
0.32
0.315
0.31
0.31
0.305
0.3
2011-12 2012-13 2013-14 2014-15
GRAPH 20 RETURN ON EQUITY RATIO OF ITC
~ - 37 - ~
2011-12
2012-13
2013-14
2014-15

DABUR
TABLE 18 RETURN ON EQUITY RATIO OF DABUR
YEAR NET INCOME SHAREHOLDERS’
EQUITY
RETURN ON EQUITY RATIO 2011-12 463.24 1303.27 0.36
2012-13 590.98 1594.78 0.37
2013-14 672.10 1902.34 0.35
2014-15 762.58 2336.19 0.32
SOURCE: BALANCE SHEET AND P/L STATEMENT OF DABUR LTD.
0.38
0.37 0.37
0.36
0.35 0.35
0.34
0.33
0.32 0.32
0.31
0.3
0.29
2011-12 2012-13 2013-14 2014-15
GRAPH 21 RETURN ON EQUITY RATIO OF DABUR
~ - 38 - ~
0.36
RETURN ON EQUITY RATIO DABUR

INTERPRETATION OF RETURN ON EQUITY

RATIO
From the analysis (Graph 27) it shows that Dabur Ltd. has higher return on equity than ITC ltd.
However in contrast to the previous years the ROE of Dabur has drastically decreased in 2014-
15 and the possible cause of this occurrence is the lower net income between 2013 to 2015
0.37 0.37
0.36
RETURN ON EQUITY RATIO ITC
0.36
0.35 0.35
RETURN ON EQUITY RATIO
DABUR 0.34
0.33 0.33
0.32
0.32
0.32 0.32
0.31 0.31
0.3
0.29
0.28
2011-12 2012-13 2013-14 2014-15
GRAPH 22 COMPARISON OF RETURN ON EQUITY RATIO OF DABUR & ITC
~ - 39 - ~

3.3.10 EARNINGS PER SHARE RATIO (EPS)

Earnings per share, also called net income per share, is a market prospect ratio that measures the amount
of net income earned per share of stock outstanding.. Earnings per share is also a calculation that shows
how profitable a company is on a shareholder basis. So a larger company's profits per share can be
compared to smaller company's profits per share. Obviously, this calculation is heavily influenced on how
many shares are outstanding. Thus, a larger company will have to split its earning amongst many more
shares of stock compared to a smaller company. Earnings per share is the same as any profitability or
market prospect ratio. Higher earnings per share is always better than a lower ratio because this means the
company is more profitable and the company has more profits to distribute to its shareholders.
EPS = NET INCOME / AVERAGE OUTSTANDING COMMON SHARES ITC
TABLE 19 EARNINGS PER RATIO OF ITC YEAR NET INCOME AVERAGE
OUTSTANDING COMMON SHARE
SOURCE: BALANCE SHEETS AND P/L STATEMENT OF ITC LTD.
GRAPH 23 EARNINGS PER SHARE RATIO OF ITC
EARNINGS PER SHARE RATIO
2011-12 6258.14 97.12 64.43 2012-13 7418.39 83.61 88.73 2013-14 8891.38 70.88 125.44
2014-15 9607.73 66.52 144.43
EARNINGS PER SHARE RATIO ITC
160
144.43
140
125.44
120
100
64.43
88.73
80
60
40
20
0
2011-12 2012-13 2013-14 2014-15
~ - 40 - ~

YEAR NET INCOME AVERAGE

OUTSTANDING COMMON SHARE
EARNINGS PER SHARE RATIO
2011-12 463.24 65.49 7.07
2012-13 590.98 51.41 11.50 2013-14 672.10 45.29 14.84 2014-15 762.58 40.38 18.88
EARNINGS PER SHARE RATIO DABUR
20
18.88
18
11.50
14.84 16 14
7.07
12 10 8 6 4 2 0
2011-12 2012-13 2013-14 2014-15

DABUR
TABLE 20 EARNINGS PER SHARE RATIO OF DABUR
SOURCE: BALANCE SHEETS AND P/L OF DABUR LTD
TABLE 24 EARNINGS PER SHARE RATIO OF DABUR
~ - 41 - ~
INTERPRETATION OF EARNINGS PER
SHARE RATIO
From Graph 29 (Dabur) it is apparent that Earnings per share of the company has drastically
improved throughout the time span and reached its pinnacle at 18.88 in 2014-15. ITC (Graph 28)
has also improved in terms of EPS with a sharp ascent during the year 2012-13. A comparative
analysis in Graph 30 below, depicts that the overall ratio of Dabur is higher than that of ITC but
the rate of increase in both the companies is commendable.
180
160
140
120
100
80
60
40
20
0
2011-12 2012-13 2013-14 2014-15
GRAPH 25 COMPARISON OF EARNING PER SHARE RATIO OF DABUR & ITC
~ - 42 - ~
EARNINGS PER SHARE RATIO DABUR
EARNINGS PER SHARE RATIO ITC
4. CONCLUSIONS AND
RECOMMENDATIONS
4.1 SUMMARY OBSERVATIONS:
TABLE 21 SUMMARY OF ALL THE RATIOS ANALYSED IN TABULAR FORM FOR THE LAST 4
FINANCIAL YEARS
2011-12 2012-13 2013-14 2014-15
ITC DABUR ITC DABUR ITC DABUR ITC DABUR CURRENT
RATIO 1.60 1.51 1.79 1.49 1.89 1.73 2.05 1.25
LIQUID RATIO 0.51 0.60 0.51 0.59 0.56 0.62 0.84 0.46
ABSOLUTE LIQUIDITY RATIO
0.37 0.27 0.35 0.34 0.29 0.26 0.65 0.11
PROPRIETARY RATIO 0.65 0.46 0.66 0.56 0.67 0.61 0.70 0.63
FIXED ASSETS TO EQUITY RATIO
0.62 0.46 0.57 0.39 0.58 0.35 1.8 0.29
DEBT-EQUITY RATIO 0.53 1.18 0.54 0.77 0.49 0.64 0.44 0.58
NET PROFIT RATIO 0.24 0.12 0.25 0.14 0.26 0.14 0.26 0.14
OPERATING PROFIT RATIO
0.35 0.17 0.36 0.17 0.37 0.18 0.39 0.18
RETURN ON EQUITY RATIO
0.32 0.36 0.33 0.37 0.32 0.35 0.31 0.32
EARNINGS PER SHARE RATIO
64.43 7.07 88.73 11.50 125.44 14.84 144.43 18.88
SOURCE: FINANCIAL STATEMENTS OF ITC AND DABUR
The following are, in brief the inferences drawn from the data analysis and calculations
made in this study:
▪ Current ratio of ITC is seen to have escalated in the time span whereas for DABUR it has kept
drooping. So it can be said that ITC Ltd. has a much better solvency position.
▪ ITC’s liquid ratio has increased over the years and in case of Dabur quick ratio is seen to
decrease especially during the last two financial years which shows that the firm has been facing
some problems regarding paying short term liabilities for 3 years. Since a higher quick ratio is
always anticipated ITC is in a better position.
~ - 43 - ~

▪ The trend of absolute liquidity ratio shows that for both the companies it has been fluctuating
throughout the period but the drop in the last financial year is especially high for Dabur
indicating an unsound liquidity position.
▪ An upward trend in the proprietary ratios of both the companies shows that the long term or
ultimate solvency of the company is good and getting better.
▪ The fixed asset to equity ratio of ITC has been satisfactory that is around 0.6. However
Dabur’s ratio has kept decreasing meaning that stockholders’ equity is more than the fixed assets
and the stockholders’ equity is financing not only the fixed assets but also a part of the working
capital.
▪ The Net profit and Operating profit ratios depicts that the ratios of Dabur have been almost 0.5
times less than that of ITC. Morover the former company fails to increase its profitability in the
last few years
▪ The trend of ratios shows that Dabur Ltd. has higher return on equity than ITC ltd. However in
contrast to the previous years the ROE of Dabur has drastically decreased in and the possible
cause of this occurrence is the lower net income between the last 2-3 years.
▪ The overall Earnings per ratio of Dabur is higher than that of ITC but the rate of increase in
both the companies is commendable.
▪ It can further be concluded that in terms of solvency and liquidity ITC Ltd. is showing a better
trend but in terms of profitability Dabur Ltd. surpasses the former marginally, if not
considerably.
4.2 RECOMMENDATIONS FOR IMPROVEMENT
Financial analysis is the process of selecting and evaluating the relationship
between component part of financial statement to obtain a better understanding of the firms’
position and performance. This financial analysis is done using the tools of ratio analysis. These
tools show us the company position in terms of liquidity profitability, solvency, bankruptcy and
stability. By using these tools we came to the conclusion that the companies should improve their
revenue from operations or sales by adopting better marketing techniques and procedures. They
should also try to expand the geographical market by trying to gain strong hold in the foreign
countries. Dabur Ltd. especially is far behind of ITC in this aspect. Further Dabur Ltd. is advised
~ - 44 - ~
to cope up and compete with its competitors in the FMCG market by introducing new and better
line of products. Both the companies are advised to improve upon the solvency and liquidity
position as they are responsible for creating a significant impact in the minds of the potential
investors and other interested parties.
In the changing economy scenario the financial performance has to be better. Even though the
firms’ profitability, liquidity and other positions are somewhat satisfactory it can reach even
higher positions and better stability if the above said suggestions are considered.
4.3 LIMITATIONS OF THE STUDY
• The study is done within a period of four months only (Oct-Jan), so some additional financial
analyses are not covered in this study.
• Further the period of study is of 4 financial years only. So this conclusions are not exhaustive.
• Due to the time constraint, all the financial ratios could not be analyzed.
• The financial statement and annual reports were used; hence the data collected is secondary**
in nature.
• Ratios are only post-mortem of what happened between two balance sheet data.
• Ratio analysis is based on accounting not economic data so its credibility is questioned by some
users.
• They reveal only the past performance of firm, it is not necessary that the same conditions have
to be repeated in the future. Past performance (good or bad) is not a perfect indicator of future
performance.
**Due to the busy schedules of the high officials of the companies the collection of primary data
was not possible. As such, this project report is restricted to the use of secondary data.
~ - 45 - ~

4.4 SCOPE FOR FURTHER RESEARCH

In light of the limitations specified earlier it can be said there was, and there is ample
scope for further research in this aspect and topic. Apart from the 10 ratios analyzed in
this project there are several other financial ratios that can be calculated and assessed to
present a clearer picture of the financial stability of the two companies. Also there are
other techniques (like common size balance sheet) for comparison and assessment of
financial statements other the conventional ratio analysis. The study can also be
conducted for a much larger time bracket which would facilitate the investors to make
more prudent and informed decisions. Apart from this use of secondary data if accessible
can improve the credibility of the calculations and results obtained as it will be free from
any manipulative figures from the internal management of the companies.
~ - 46 - ~
BIBLIOGRAPHY
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Development.
~ VIII ~
Annexure II- A
Financial Statements of ITC Ltd.
~ IX ~
~X~
Annexure II – B
Financial Statements of Dabur India Ltd.
~ XI ~
~ XII ~