PROJECT REPORT

(Submitted for the degree of B.Com. Honours in Accounting & Finance under the University of Calcutta)

RATIO ANALYSIS OF HINDUSTAN UNILEVER LIMITED

SUBMITTED BY
NAME : Soubhik Das

CU REGISTRATION NO. : 046-1111-0492-20

CU ROLL NO. : 201046-21-0315
COLLEGE ROLL NO: 2015452
PAPER CODE : CC6.1Ch
NAME OF THE COLLEGE : PRAFULLA CHANDRA COLLEGE

SUPERVISED BY
NAME OF THE SUPERVISOR : PROF. Dipanjan Basu

NAME OF THE COLLEGE : PRAFULLA CHANDRA COLLEGE

MONTH & YEAR OF SUBMISSION

MAY, 2023
Annexure-I

SUPERVISOR CERTIFICATE
This is to certify that Soubhik Das, a student of B.Com 6th Semester Honours in

Accounting & Finance of PRAFULLA CHANDRA COLLEGE under the University of

Calcutta has worked under my supervision and guidance for his Project Work and prepared

Project Report with the title RATIO ANALYSIS OF HINDUSTAN UNILEVER LIMITED

which he is submitting, is his genuine and original work to the best of my knowledge.

PLACE : KOLKATA SIGNATURE : -----------------------

DATE : NAME : Prof. Dipanjan Basu
DESIGNATION : --------------------
NAME OF THE COLLEGE :
PRAFULLA CHANDRA COLLEGE
Annexure-II

STUDENT DECLARATION
I hereby declare that the Project Work with the title RATIO ANALYSIS OF HINDUSTAN
UNILEVER LIMITED submitted by me for the partial fulfilment of the degree of B.Com. Honours
in Accounting & Finance under the University of Calcutta in my original work and has not been
submitted earlier to any other University / Institution for the fulfilment 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 is used for
this report has been duly acknowledged providing details of such literature in the references.

PLACE : KOLKATA SIGNATURE : -----------------------

DATE : NAME : Soubhik Das

DESIGNATION : --------------------
NAME OF THE COLLEGE :
PRAFULLA CHANDRA COLLEGE
 ACKNOWLEDGEMENT

I would like to thank University of Calcutta for providing with such a wonderful opportunity to
prepare the project by including this as part of our study curriculum. I am very grateful to my
college and my principal.

I am also very thankful to my supervisor Prof. Dipanjan Basu for her valuable and timely
guidance throughout the project. Her feedbacks, guidance and support have been very useful. I
would thank her for being my mentor in doing this project. This project has allowed me a
practical exposure in the corporate field and a brief introduction in the day to day working of
anorganization.

Last but not the least I would like to thank my parents and friends for their support and guidance.
 CONTENTS
CHAPTER’s PAGE
No. CONTENTS NO.
1. INTRODUCTION (1-6)
1.1 Background of the study 2
1.2 Need of the study 2
1.3 Literature Review 3-4
1.4 Objectives of the study 5
1.5 Research Methodology 5
1.6 Limitation of the study 6

2. CONCEPTUAL FRAMEWORK (7-20)

2.1 Meaning of Ratio Analysis 8
2.2 Objectives of Ratio Analysis 8-10
2.3 Significance of Ratio Analysis 10-11
2.4 Type of Ratio Analysis 11-18
2.5 Company Profile 19-20

3. PRESENTATION OF DATA ANALYSIS (21-32)

& FINDINGS

3.1 Presentation of Data Analysis 22-31

3.2 Findings 32
4. CONCLUSION & RECOMMENDATIONS (33-34)
4.1 CONCLUSION 34
4.2 RECOMMENDATIONS 34

BIBLIOGRAPHY (35)
 ANNEXURE
Profit & Loss Account
Balance Sheet 37
Cash Flow Statement
38
1
1.1 Background Of The Study

Hindustan Unilever Limited (HUL) is an Indian consumer goods company

headquartered in Mumbai, INDIA. It is a subsidiary of Unilever, an Anglo-Dutch
company. Its products include foods, beverages, cleaning agents, personal care
products, water purifiers and other fast-moving consumer goods.

HUL was established in 1931 as Hindustan Vanaspati Manufacturing Co. and following a
merger of constituent groups in 1956, it was renamed Hindustan Lever Limited. The
company was renamed in June 2007 as Hindustan Unilever Limited.

As of 2019 Hindustan Unilever's portfolio had 35 product brands in 20 categories. The

company has 18,000 employees and clocked sales of 34,619 crores in FY2017–18.

In December 2018, HUL announced its acquisition of GlaxoSmithKline’s INDIA business

for $3.8 billion in an all equity merger deal with a 1:4.39 ratio. However the integration of
GSK's 3,800 employees remained uncertain as HUL stated there was no clause for retention
of employees in the deal. In April 2020, HUL completed its merger with GlaxoSmithKline
Consumer Healthcare (GSKCH India) after completing all legal procedures.

1.2 Need Of The Study

The purpose of this project is used to identify the trends and relationships between financial
statement items. Both internal management and external users (such as analysts, creditors, and
investors) of the financial statements need to evaluate a company's profitability, liquidity, and
solvency. The most common methods used for financial statement analysis are trend analysis,
common‐size statements, and ratio analysis. These methods include calculations and
comparisons of the results to historical company data, competitors, or industry averages to
determine the relative strength and performance of the company being analysed.

2
1.3 Literature Review

The review of literature guides the researchers for getting better understanding of methodology
used, limitation of various available estimation procedures and database, and lucid
interpretation and reconciliation of the conflicting results. In case of conflicting and unexpected
results, the research can take the advantage of knowledge of their researcher simply through
the the medium of their published works. A number of research studies have been carried out
on different aspects of performance appraisal by the researchers, economists and academicians
in India and abroad. Different authors have analysed performance in different perspectives.

Rajesh (2017) in this “study on financial performance of care it solution private limited”. The
objective of this study is liquidity, stability and profitability position, common size, and
financial strength of the company. The gives a clear idea of the financial performance of the
company over last 5 years. It can be suggested that the company improve their customer
services and technology they will come up with the standard level. The study conclude that
findings and recommendations which would be useful for the development and improvement
to the company.

Pavithra et al., (2017) in her “study on the analysis of financial performance with reference to
Jeppiaar Cements Pvt Ltd”. The study has been carried out for the period of 5 years and it is
not sufficient enough to analyse the entire aspect of the company. The objective of their study
is overall profitability position, trend financial analysis of the company. It can be suggested
that the company must be made more vigilant to maintain or improve the present situation
because if there is any further fall in the current ratio. It may be a serious problem for the
company. The study concluded that company overall financial performance normal.The current
assets have to properly maintain to bring the current ratio to the normal.

Zafar S.M.Tariq & Khalid S.M (2012) The study explored that ratios are calculated from
financial statements which are prepared as desired policies adopted on depreciation and
stock valuation by the management. Ratio is simple comparison of numerator and a
denominator that cannot produce complete and authentic picture of business. Results are

3
manipulated and also may not highlight other factors which affect performance of firm by
promoters.

Joanne Loundes (2001) “The Financial performance of Australian Government Trading

Enterprises Pre-and Post-Reform” revealed that during the 1990's there were several
measures introduced to improve the efficiency and financial performance of government
trading enterprises in Australia. The purpose of this study was to discover whether there had
been any change in the financial performance of government trading enterprises operating
in electricity, gas, water, railways and ports industries as a result of these changes. The study
reveals that it does not appear to have been a noticeable enhancement in the financial
performance of most of this business,although railways have improved slightly, from a low
base.

Ritu Sharma , Ankita Jain (2018) The main objectives of this paper is to examine the
preference of consumers towards flagship brands of Hindustan Unilever Limited (HUL)
and Procter & Gamble (P&G), and identify the impact of various factors which influence
the buying choices of consumers. Hair care and home care (detergents) product categories
were selected for the purpose of this study. It is found that the flagship brands of both HUL
and P7G command sizeable market shares, and the market shares of the corresponding
flanker brands are considerably lower. It is also found that there is a significant difference
in the preference of consumers towards the flagship and flanker brands of HUL and P&G
on the basis of price, quality and brand image.

Aloke Gupta, Debasish Sur (2013) Competitive forces with the unleashing of the
liberalisation policy have made analysis of business and financial risk essential for survival
and growth of business houses in India. In this backdrop, the present paper seeks to evaluate
empirically the business and financial risks associated Hinhustan Unilever Ltd. (HUL), the
largest private sector company in Indian Fast Moving Consumer Goods (FMCG) industry
during the 10 year period from 2002-03 to 2011-12 . It has also been attempted to see how
the return of the company reacted to the changes in aforesaid during the period. It has been
observed that HUL managed to keep the all over business risk and financial risk at moderate
level during the study period.

4
1.4 Ojectives Of The Study

o To know the short term and long term financial position of the company.
o To determine the profitability of the company.
o To calculate the trend analysis of the company.
o To assess the earning capacity or profitability of the firm.
o To assess the operational efficiency and managerial effectiveness.
o To identify the reasons for change in profitability and financial position of the
firm.
o To make inter-firm comparison.
o To make forecasts about future prospects of the firm.
o To assess the progress of the firm over a period of time.
o To help in decision making and control.

1.5 Research Methodology

A research design is the arrangement of activities for the collection and analysis of the
data in a manner that aim to combine relevance to the research purpose with economy
in procedure. It is the structure of investigation to obtain answers to research questions.
It includes the outline of what the investigator will do from writing the hypothesis and
their operational implications to final analysis of data.

The secondary data are those which have already been collected by someone else and
which have already been passed through the statistical process. Thus the data has been
collected through company document, annual reports and records. Source like
magazines, books, articles, journals, etc

The necessary data are required for the study collected from financial statements of various
companies under the industry. The study covers a period of five years from year 2017-2018
to 2021-22. The relevant Profit and Loss Account, Balance Sheet are attached to the
annexure of the study. Different financial ratios, as worked out of the data from various
secondary sources are analyzed to form an opinion about the performance of the
HINDUSTAN UNILEVER LIMITED. The Study is basically carried out using various
ratio analysis and trend analysis and results are presented using different graphs, charts etc.
for better understanding.

5
1.6 Limitations Of Study
o The required data which are obtained for the study are all secondary data; no primary
data was used.

o Company have its own secrecy, so the interpretation given may not be accurate.

o Information provided in the project is limited to five year.

o Due to change in accounting policies during the year, the data may not be comparable
from year to year.

o Due to lack of adequate information, approximate values have been taken.

6
7
Introduction
A ratio can be used as a yardstick for the evaluating the financial position and performance of
the concern. It is the relationship between two related interdependent accounting variables
expressed mathematically but they assume significant if these variables have cause and effect
relationship. For example, profit earned to capital reemployed are significantly related but
turnover cannot be said to be significantly related to investment in shares. In brief, accounting
ratios provide a quantitative relationships which the analyst may use to make a quantitative
judgement about various aspect of financial position and performance of an enterprise.

2.1 Meaning of Ratio Analysis

Ratio analysis refers to the analysis and interpretation of the figures appearing in the financial
statements i.e., Profit an Loss account, Balance Sheet and Fund Flow Statement etc.

It is a process of comparison of one figure against another. It enables the users like
shareholders, investors, creditors, Government, and analysts etc. to get better understanding of
financial statements.

Generally, ratio and analysis involves four steps:

1. Collection of relevant accounting data from financial statement.

2. Constructing ratios of related accounting figures.
3. Comparing the ratios thus constructed with the standard ratios which maybe the
corresponding pat ratios of the firm or industry average ratios of the firm ratios of
competitors.
4. Interpretation of ratios to arrive at valid conclusions.

2.2 Objectives of Ratio Analysis

Interpreting the financial statements and other financial data is essential for all stakeholders of
an entity. Ratio Analysis hence becomes a virtual tool for financial analysis and financial
management. Let us took at some objectives that ratio analysis fulfils. The objectives are as
follows:

8
 Measure of Profitability :

Profit is the ultimate aim of every organization. Context is required to measure profitability,
which is provided by ratio analysis. Gross Profit Ratios, Net Profit Ratio, Expense ratio etc
provide a measure of the profitability of a firm. The management can use such ratios to find
out problem areas and improve upon them.

 Evaluation of Operational Efficiency :

Certain ratios highlight the degree of efficiency of a company in the management of its
assets and other resources. It is important that assets and financial resources be allocated
and used efficiently to avoid unnecessary expenses. Turnover Ratios and Efficiency Ratios
will point out any mismanagement of assets.

 Ensure Suitable Liquidity :

Every firm has to ensure that some of its assets are liquid, in case it requires cash
immediately. So the liquidity of a firm is measured by ratios such as Current ratio and Quick
Ratio. These help a firm maintain the required level of short-term solvency.

 Overall Financial Strength :

There are some ratios that help determine the firm’s long-term solvency. They help
determine if there is a strain on the assets of a firm or if the firm is over-leveraged. The
management will need to quickly rectify the situation to avoid liquidation in the future.
Examples of such ratios are Debt-Equity Ratio, Leverage ratios etc.

 Comparison :

The organizations’ ratios must be compared to the industry standards to get a better
understanding of its financial health and fiscal position. The management can take
corrective action if the standards of the market are not met by the company. The ratios can

9
 also be compared to the previous years’ ratio’s to see the progress of the company. This is
known as Trend Analysis.

2.3 Significance of Ratio Analysis

The main points of importance are as follows :

o Test of solvency. Ratios can illuminate the solvency of a firm. For example, when the
ratio of current assets to current liabilities is increasing, this indicates sufficient working
capital. Thus, creditors can be paid easily.

o Helpful in decision-making. The main aim of financial statements is to inform users

about the financial position of the company, as well as to serve as a decision-making
aid for managerial personnel.

o Helpful in financial forecasting and planning. Ratios are critical in financial planning
and forecasting. For example, if a firm's current ratio is 5:1, this means that capital is
blocked up. As the ideal ratio is 2:1, we have 5:1, meaning that $3 is unnecessarily
blocked.

o Useful in discovering profitability. Ratios are also useful when comparing the
profitability of different companies. Present and past ratios can be compared, for
example, to discover trends in the historical and future performance of companies.

o Liquidity position. With the use of ratio analysis, meaningful conclusions can be
obtained about the sound liquidity position of the firm. A firm's liquidity position is
sound if it can pay its debts when these are due for payments.

o Useful for operating efficiency. From a management perspective, ratios enable

managers to measure the efficiency of assets. When sales and their contribution to net
profit increase every year, this is a test of higher efficiency.

o Business trends. Ratio analysis can expose trends that managers may use to take
corrective actions.

10
 o Helpful in cost control. Ratios are useful to measure performance and facilitate cost
control.

o Helpful in analyzing corporate financial health. Ratio analysis can provide information
about liquidity, solvency, profitability, and capital gearing. Thus, they are valuable for
learning about financial health.

2.4 Types of Ratio Analysis

A. Liquidity Ratio :
Liquidity is a very critical part of a business. Liquidity is required for a business to meet
its short term obligations. Liquidity ratios are a measure of the ability of a company to
pay off its short-term liabilities.

Liquidity ratios determine how quickly a company can convert the assets and use them
for meeting the dues that arise. The higher the ratio, the easier is the ability to clear the
debts and avoid defaulting on payments.

This is a very important criterion that creditors check before offering short term loans
to the business. An organisation which is unable to clear dues results in creating impact
on the creditworthiness and also affects credit rating of the company.

1. Current Ratio :
The current ratio is a measure of a company’s ability to pay off the obligations
within the next twelve months. This ratio is used by creditors to evaluate
whether a company can be offered short term debts. It also provides information
about the company’s operating cycle. It is also popularly known as Working
capital ratio. It is obtained by dividing the current assets with current liabilities.

Current ratio is calculated as follows:

Current ratio = Current Assets / Current Liabilities.

11
 A higher current ratio around two(2) is suggested to be ideal for most of the
industries while a lower value (less than 1) is indicative of a firm having
difficulty in meeting its current liabilities.

2. Quick Ratio :
Quick ratio is also known as Acid test ratio is used to determine whether a
company or a business has enough liquid assets which are able to be instantly
converted into cash to meet short term dues. It is calculated by dividing the
liquid current assets by the current liabilities.

It is represented as :

Quick Ratio = (Cash + Marketable securities + Accounts receivable) / Current

liabilities.

The ideal quick ratio should be one(1) for a financially stable company.

B. Solvency Ratio :
Solvency ratios are a key component of the financial analysis which helps in
determining whether a company has sufficient cash flow to manage the debt obligations
that are due. Solvency ratios are also known as leverage ratios. It is believed that if a
company has a low solvency ratio, it is more at the risk of not being able to fulfil its
debt obligation and is likely to default in debt repayment.

Solvency ratios are used by prospective business lenders to determine the solvency state
of a business. Companies that have a higher solvency ratio are deemed more likely to
meet the debt obligations while companies with a lower solvency ratio are more likely
to pose a risk for the banks and creditors. Solvency ratios vary with the type of industry,
but as a good measure a solvency ratio of 0.5 is always considered as a good number to
have.

12
Solvency ratios should not be confused with liquidity ratios. They are totally different.
Liquidity ratios determine the capability of a business to manage its short-term
liabilities while the solvency ratios are used to measure a company’s ability to pay
longterm debts.

1. Debt-Equity Ratio :

Debt to equity is one of the most used debt solvency ratios. It is also represented
as D/E ratio. Debt to equity ratio is calculated by dividing a company’s total
liabilities with the shareholder’s equity. These values are obtained from the
balance sheet of the company’s financial statements.

It is an important metric which is used to evaluate a company’s financial

leverage. This ratio helps understand if the shareholder’s equity has the ability
to cover all the debts in case business is experiencing a rough time.

It is represented as :

Debt to equity ratio = Long term debt / shareholder’s funds.

Or

Debt to equity ratio = total liabilities / shareholders’ equity.

A high debt-to-equity ratio is associated with a higher risk for the business as it
indicates that the company is using debt for fuelling its growth. It also indicates
lower solvency of the business.

2. Interest Coverage Ratio :

The interest coverage ratio is used to determine whether the company is able to
pay interest on the outstanding debt obligations. It is calculated by dividing
company’s EBIT (Earnings before interest and taxes) with the interest payment
due on debts for the accounting period.

13
 It is represented as :

Interest coverage ratio = EBIT / interest on long term debt.

Where EBIT = Earnings before interest and taxes or Net Profit before interest
and tax.

A higher coverage ratio is better for the solvency of the business while a lower
coverage ratio indicates debt burden on the business.

C. Activity Ratio :

Activity ratios are used to determine the efficiency of the organisation in utilising its
assets for generating cash and revenue. It is used to check the level of investment made
on an asset and the revenue that it is generating. For this reason, the activity ratio is also
known as the efficiency ratio or the more popular turnover ratio.

The role of activity ratio or turnover ratio is in the evaluation of the efficiency of a
business by careful analysis of the inventories, fixed assets and accounts receivables.

1. Asset Turnover Ratio :

The asset turnover ratio measures the value of a company's sales or revenues
relative to the value of its assets. The asset turnover ratio can be used as an
indicator of the efficiency with which a company is using its assets to generate
revenue.

It is represented as :

Asset Turnover Ratio = Sales / Total Assets.

14
 A higher ratio is generally favored as there is the implication that the company
is more efficient in generating sales or revenues. A lower ratio illustrates that a
company may not be using its assets as efficiently. Asset turnover ratios vary
throughout different sectors, so only the ratios of companies that are in the same
sector should be compared. The ratio is typically calculated on an annual basis,
though any time period can be selected.

2. Inventory Turnover Ratio :

Inventory turnover is a financial ratio showing how many times a company

turned over its inventory relative to its cost of goods sold (COGS) in a given
period. A company can then divide the days in the period, typically a fiscal year,
by the inventory turnover ratio to calculate how many days it takes, on average,
to sell its inventory.

It is represented as :

Inventory Turnover Ratio = Cost Of Good Sold / Average Stock.

The inventory turnover ratio can help businesses make better decisions on
pricing, manufacturing, marketing, and purchasing. It is one of the efficiency
ratios measuring how effectively a company uses its assets.

3. Fixed Asset Turnover Ratio :

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

15
It is represented as :

Fixed Asset Turnover Ratio = Net Sales / Average Fixed Assets.

The fixed asset balance is used as a net of accumulated depreciation. A higher fixed asset
turnover ratio indicates that a company has effectively used investments in fixed assets to
generate sales.

D. Profitability Ratio :

Profitability ratios are a class of financial metrics that are used to assess a business's
ability to generate earnings relative to its revenue, operating costs, balance sheet assets,
or shareholders' equity over time, using data from a specific point in time. They are
among the most popular metrics used in financial analysis.

Profitability ratios can be a window onto the financial performance and health of a
business. Ratios are best used as comparison tools rather than as metrics in isolation.

Profitability ratios can be used along with efficiency ratios, which consider how well a
company uses its assets internally to generate income (as opposed to after-cost profits).

1. Net Profit Ratio :

Net profit ratio is an important profitability ratio that shows the relationship
between net sales and net profit after tax. When expressed as percentage, it is
known as net profit margin.

Formula for net profit ratio is

Net Profit Ratio = Net Profit after tax ÷ Net sales

16
 Or
Net Profit Ratio = Net profit/Revenue from Operations × 100
It helps investors in determining whether the company’s management is able to
generate profit from the sales and how well the operating costs and costs related
to overhead are contained.

2. Return On Asset :

Return on Assets (ROA) is a type of return on investment (ROI) metric that

measures the profitability of a business in relation to its total assets. This
ratio indicates how well a company is performing by comparing the profit
(net income) it’s generating to the capital it’s invested in assets. The higher
the return, the more productive and efficient management is in utilizing
economic resources. Below you will find a breakdown of the ROA formula
and calculation.

Formula for net profit ratio is

ROA = Net Income / Average Assets.

or

ROA = Net Income / End of Period Assets.

Net Income is equal to net earnings or net income in the year (annual period)

Average Assets is equal to ending assets minus beginning assets divided by

2.

17
4. Return on Capital Employed :

Return on capital employed (ROCE) or Return on Investment is a profitability

ratio that measures how well a company is able to generate profits from its
capital. It is an important ratio that is mostly used by investors while screening
for companies to invest.

The formula for calculating Return on Capital Employed is :

ROCE or ROI = EBIT ÷ Capital Employed × 100

Where EBIT = Earnings before interest and taxes or Profit before interest and
taxes
Capital Employed = Total Assets – Current Liabilities.

18
2.5 Company Profile

Hindustan Unilever Limited (HUL) is an Indian consumer goods company

headquartered in Mumbai, India. It is a subsidiary of Unilever,
an Anglo-Dutch company. Its products include foods,
beverages, cleaning agents, personal care products,
water purifiers and other fast-moving consumer goods
HUL was established in 1931 as Hindustan Vanaspati
Manufacturing Co. And following a merger of constituent
groups in 1956, it was renamed Hindustan Lever Limited.
The company was renamed in June 2007 as Hindustan Unilever
Limited. As of 2019 Hindustan Unilever's portfolio had
35 product brands in 20 categories.The company has
18,000 employees and clocked sales of 34,619 crores in
FY2017–18.
In December 2018, HUL announced its acquisition of
GlaxoSmithkline's India business for $3.8 billion in an
all equity merger deal with a 1:4.39 ratio. However the
integration of GSK's 3,800 employees remained uncertain
as HUL stated there was no clause for retention of employees

19
in the deal. In April 2020, HUL completed its merger
with GlaxoSmithKline Consumer Healthcare (GSKCH India)
after completing all legal procedures.

20
 CHAPTER-3
PRESENTATION OF
DATA ANALYSIS &
FINDINGS

21
3.1 Presentation Of Data Analysis :
A. LIQUIDITY RATIO
1. Current Ratio

The current ratio is the ratio between the current assets and current liabilities of
a company. The current ratio is used to indicate the liquidity of an organization
in being able to meet its debt obligations in the upcoming twelve months. A
higher current ratio will indicate that the organization is highly capable of
repaying its short-term debt obligations. The standard Current Ratio is 2:1. This
mean that a firm should have Current Asset of rs. 2 for having Current
Liabilities rs.1.

𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑹𝒂𝒕𝒊𝒐 = 𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑨𝒔𝒔𝒆𝒕𝒔 / 𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

• TABLE NO : 1 Current Ratio

YEAR 2018 2019 2020 2021 2022

1.26
1.31 1.34
Current Ratio 1.29 1.36

SOURCE: www.moneycontrol.com

• INTERPRETATION
Current ratio in all the years is below standard ratio of 2:1. So it can be concluded that
short term solvency position of the company is not fevorable A higher current ratio is
always more favourable than a lower current ratio because it shows the company can
more easily make current debt payments. From the graph we can see that the current
ratio of HUL for the year 2018,2019,2020,2021,2022 are 1.29, 1.36, 1.31, 1.26 and 1.34
respectively

22
 2. . Quick Ratio
It measures the ability of a company to use its near cash and quick assets to exitnguish
or retire its current liabilities immediatel . It is defined as the ratio between quickly
available or liquid assets and current liabilities. Quick assets are current assets that can
presumably be quickly converted to cash at close to their book values.

Quick Ratio = Quick Assets / Quick Liabilities

• TABLE NO : 2 Quick Ratio

YEAR 2018 2019 2020 2021 2022

Quick 1.02 1.07 1.02 0.95 0.98

Ratio

SOURCE: www.moneycontrol.com

Quick Ratio
1.1
1.05
1
0.95
0.9
0.85
2018 2019 2020 2021 2022
Column2 Column3 Column4 Column5 Column6

• INTERPRETATION
Standard ratio is 1:1. It is seen that the company’s quick asset is fluctuation over the
years. The ratio increase and decreases over the years due to increase and decrease in
cash and cash equivalents.

23
B. SOLVENCY RATIO
1. Debt-Equity Ratio
It is a financial ratio indicating the relative proportion of shareholders' equity
and debt used to finance a company's assets. The two components are often
taken from the firm's balance sheet or statement of financial position, but the
ratio may also be calculated using market values for both, if the company's debt
and equity are publicly traded, or using a combination of book value for debt
and market value for equity financially.

Debt-Equity Ratio = Total debt / Share holders Fund

• TABLE NO : 3 Debt-Equity Ratio

YEAR 2018 2019 2020 2021 2022

Debt-Equity 0.00 0.00 0.00 0.00 0.00

Ratio

SOURCE: www.moneycontrol.com

Debt-Equity Ratio
0.015
0.01
0.005 0

2018 2019 2020 2021 2022

Column2 Column3 Column4 Column5 Column6

• INTERPRETATION
The standard norm for the ratio is 2:1. The HINDUSTAN UNILEVER LTD do not have any
debt capital in the capital structure. Therefore we cannot calculate debt equity ratio.
Therefore we can say that the firm is losing the benefit of having debt capital. The benefit of
debt financing is that it allows a business to leverage a small amount of money into a much
larger sum, enabling more rapid growth than might otherwise be possible.
In addition, payments on debt are generally tax-deductible.

24
 2. Interest Coverage Ratio
The ratio is very meaningful to debenture holders and lenders of long-terms
funds. The objective of calculating this ratio is to ascertain the amount of profit
available to cover interest on long-term debt. A high ratio is considered better
for the lenders as it means higher margin to meet interest cost.

𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝑪𝒐𝒗𝒆𝒓𝒂𝒈𝒆 𝑹𝒂𝒕𝒊𝒐 = Profit before Interest & Tax / 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒐𝒏

𝑳𝒐𝒏𝒈 − 𝒕𝒆𝒓𝒎 𝑫𝒆𝒃

• TABLE NO : 4 Interest Coverage Ratio

YEAR 2018 2019 2020 2021 2022

Interest 283.19 268.64 80.43 93.69 123.73

Coverage
Ratio

SOURCE: www.moneycontrol.com

Interest Coverage Ratio

300
250
200
150
100
50
0
2018 2019 2020 2021 2022
Column2 Column3 Column4 Column5 Column6

• INTERPRETATION
Interest Coverage Ratio was 283.19, 268.64, 80.43, 93.69 and 123.73 in respective year
of 2017, 2018, 2019, 2020 and 2020. We can observe that the ratio was increasing up
to 2018 then it is again decreasing

25
C. ACTIVITY RATIO
1. Asset Turnover Ratio
It is an activity ratio that measures the efficiency with which assets are used by
a company. It is computed by dividing net sales by average total assets for a
given period.

Assets Turnover 𝑹𝒂𝒕𝒊𝒐 = Net Sales / Average Total Assets

• TABLE NO : 5 Asset Turnover Ratio

YEAR 2018 2019 2020 2021 2022

Asset
Turnover 201.32 213.96 197.86 67.52 0.74
Ratio

SOURCE: www.moneycontrol.com

Asset Turnover Ratio

250
200
150
100
50
0
2018 2019 2020 2021 2022
Column2 Column3 Column4 Column5 Column6

• INTERPRETATION
Total assets turnover ratio fluctuates over the year. Investments in fixed assets should
not be properly utilized and there should be increase in sales.

26
 2. Inventory Turnover Ratio
Inventory turnover ratio or stock turnover ratio indicates the relationship
between cost of goods sold‖ and average inventory‖. It indicates how efficiently
the firm’s investment in inventories is converted to sales and thus depicts the
inventory managementskills of the organization. It is both an activity and
efficiency ratio. This ratio helps to determine stock related issues such as
overstocking and overvaluation.

Inventory Turnover 𝑹𝒂𝒕𝒊𝒐 = Cost of Good Sold / Average Stock

• TABLE NO : 6 Inventory Turnover Ratio.

YEAR 2018 2019 2020 2021 2022

Inventory
Turnover 14.64 15.78 14.71 13.60 4.36
Ratio

SOURCE: www.moneycontrol.com

Inventory Turnover Ratio

20
15
10
5
0
2018 2019 2020 2021 2022
Column2 Column3 Column4 Column5 Column6

• INTERPRETATION
It is observed that the ratio increases rapidly on MAR’19 ,after that it goes on a decline
mood. The Company should improve its inefficient inventory management and should
also increase its sales.

27
 3. Fixed Asset Turnover Ratio
It is the ratio of sales (on the profit and loss account) to the value of fixed assets
(on the balance sheet). It indicates how well the business is using its fixed assets
to generate sales. A declining ratio may indicate that the business is
overinvested in plant, equipment, or other fixed assets.

𝑭𝒊𝒙𝒆𝒅 𝑨𝒔𝒔𝒆𝒕 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝑹𝒂𝒕io = Net 𝑺𝒂𝒍𝒆 / Average 𝑭𝒊𝒙𝒆𝒅 𝑨𝒔𝒔𝒆𝒕

• TABLE NO : 7 Fixed Asset Turnover Ratio

YEAR 2018 2019 2020 2021 2022

𝑭𝒊𝒙𝒆𝒅 𝑨𝒔𝒔𝒆𝒕
𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 7.09 6.98 5.64 0.89 0.51

𝑹𝒂𝒕io

SOURCE: www.moneycontrol.com

Fixed Asset Turnover Ratio

8
6

0
2018 2019 2020 2021 2022
Column2 Column3 Column4 Column5 Column6

• INTERPRETATION
According to the figure it can be concluded that the ratio fluctuates over the year
Therefore, the company investment is ineffective in fixed assets.

28
D. PROFITABILITY RATIO
1. Net Profit Ratio
It is the ratio between net profit and sales. Here net profit refers to net profit
after tax and sales means sales i.e. sales less sales return and excise duty and it
is calculated as follows:

Net Profit Ratio = Net Profit / Net Sale

• TABLE NO : 8 Net Profit Ratio

YEAR 2018 2019 2020 2021 2022

Net
Profit 15.18 15.89 17.37 17.29 17.35
Ratio

SOURCE: www.moneycontrol.com

Net Profit Ratio

18
17
16
15
14
2018 2019 2020 2021 2022
Column2 Column3 Column4 Column5 Column6

• INTERPRETATION
After observing the figure, the ratio fluctuates over the year. It was maximum in 2020
but it was decreased in 2018. Company has maximum net profit in the year 2020 &
2022 because sales are maximum in this year. The overall ratio is showing a good
position of profitability of the company.

29
 2. Return On Asset
It is a measure of the profitability of all financial resources invested in the firm’s
assets or on total funds without any regard to the sources of fund.

Return On Asset = Net Profit / Average Asset

• TABLE NO : 9 Return On Asset

YEAR 2018 2019 2020 2021 2022

Return
On Asset 30.53 33.78 34.37 11.67 12.64

SOURCE: www.moneycontrol.com

Return On Asset
40
35
30
25
20
15
10
5
0
2018 2019 2020 2021 2022
Column2 Column3 Column4 Column5 Column6

• INTERPRETATION
Return on asset ratio are 30.53, 33.78, 34.37, 11.67 and 12.64 in respective year of
2018, 2019, 2020, 2021 and 2022 so the company achieved maximum Return on asset
ratio in 2020

30
 3. Return On Capital Employed
It is the most important profitability ratio as it reflects the overall efficiency with
which capital is used. It indicates how well management has used the funds
supplied by outsiders & owners.

Return On Capital Employed = EBIT / Capital Employed

• TABLE NO : 9 Return On Asset

YEAR 2018 2019 2020 2021 2022

Return
On 86.53 92.27 89.49 18.90 20.19
Capital
Employed

SOURCE: www.moneycontrol.com

Return On Capital Employed

100
80
60
40
20
0
2018 2019 2020 2021 2022
Column2 Column3 Column4 Column5 Column6

• INTERPRETATION
The return on capital employed ratio are increasing as the years are moving forward but
in 2021, it falls rapidly. Companies' returns should always be high than the rate at which
they are borrowing to fund the assets.

31
3.2 Findings
• The net profit ratio is showing a good position of profitability of the company.

• Return on capital employed was highest in the 2019 then there was a fall then again the
ratio was increasing.
• Current ratio fluctuates over the year.

• Quick ratio fluctuates over the years.

• The Company should improve its inefficient inventory management and should also
increase its sales.
• In debt equity ratio it can be observed that the company has lowly geared capital
structure because proportion of debt capital is lower than equity.
• Fixed Assest Turnover Ratio fluctuates over the year. Therefore, the company
investment is ineffective in fixed assets.
• The company must imply efficient working capital management.

• Total assets turnover ratio fluctuates over the years.

32
33
4.1 CONCLUSION

Hindustan Unilever Ltd is a leading FMCG company in India and from last five consecutive
years has shown accelerated growth in portfolio. Customers in India are also spending more in
their standard of living is growing. HUL has placed itself successfully in the position of market
leader in FMCG products. Though there was some downfall in sales and profit of the company
in the beginning of this decade but after that HUL has shown considerable rise in both sales
and profit. The future of the company is also looking bright as FMCG market in India is still
expanding and so we can safely conclude that HUL will be able to secure its number one
position in FMCG product.

4.2 RECOMMENDATIONS
o It should reduce the cost of management
o It should control the non-operation expenses and other expenditure.
o It should ready for the coming competition in the market.
o To increase the net profit, carefully designed risk management system and cost control.

34
 BIBLIOGRAPHY
The project has been prepared on the basis of secondary data which was collected from the
following:

Articles :
 Sharma, Ritu and Jain, Ankita, Flagship and Flanker Brands : Consumer Preference Study of
Hindustan Unilever Limited and Procter & Gamble (September 2018). The UPI Journal of Brand
Management, Vol. XV, NO.3, September 2018, pp. 7-22.
 Gupta, Aloke ; Sur, Debasish, Asia – Pacific Finance and Accounting Review; New Delhi Vol. 1,
Issue 4, ( Jul – Dec 2013 ): 77 – 93.

Websites :
 www.moneycontrol.com
 www.investopedia.com
 www.capitalmarket.com
 www.hul.co.in
 www.financialexpress.com
 www.accountingcapital.com

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ANNEXURE

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