Published on

  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide


  1. 1. CERTIFICATE -I This is to certify that the project report entitled ³Comparative Analysis of Nestle V/S Cadbury´ undertaken at ³Nestle India Ltd.´ is a bonafide work carried out by ³Lalita Kumari´ for partial fulfillment of the requirements for Master in Commerce (M.Com) during the academic year 2005 - 2007 under my supervision and guidance. It is also certified that the form and content of the above mentioned project are original and have not been submitted in any part or full, for any other degree or diploma of this organization or other organization/institute/university according to the best of my knowledge and belief. I am fully satisfied with her work & wish her Best of Luck in future endeavors. Internal Examiner External Examiner Prof. Avtar Singh
  2. 2. Major Advisor & Head of Commerce Department G.T.B.National College, Dakha ACKNOWLEDGEMENT It was indeed a great pleasure & a most cherish able learning experience for me in acknowledging valuable assistance & cooperation by people around me. ³If words are considered as symbol of approval & token of appreciation then let the words play the heralding role of expressing my gratitude´. First of all I am thankful to almighty God & my dear parents because without their blessings this project was not possible for me. ³No endeavor is a one man show´, it is a contributing effort of all those who helped me directly or indirectly in completion of this project. I wish to take this opportunity to express our deepest & immense thanks to all the talented people who contributed to this project by providing their valuable guidance. I am extremely grateful to Mr. Paul Stienkamp (Factory Manager), Mr. Mahesh Karandikar (H.R. Manager) & Mr.J.K.Singla (Finance Manager) of ³Nestle India Ltd.´ for providing valuable information in spite of their busy schedules. My sincere thanks to Prof. Avtar Singh for his encouragement & continuous support which has made me to abstain from being hackneyed by showing me a new way & whole new dimensions in the analysis and design of my project. Last but not the least I would like to thanks to all of them who helped me directly or indirectly in completion of this project by their brains, hearts & hands from core of my heart. In the end, I can state about my practical training in brief by recalling the ancient Chinese proverb:
  3. 3. ´I hear, I forgot« I see, I remember«. I do, I understand«µ Lalita Kumari M.Com. (2nd Sem) ANNEXURE Title of the Thesis/Dissertation : ³Comparative Analysis Of Nestle V/S Cadbury´ Name of Student : Lalita Kumari. Registration No. : 02-GTD-53. Name & Designation of Advisor : S. Avtar Singh. (Professor) Degree to Be Awarded : M.Com. Session : 2005-2007. Name of University : Panjab University, Chandigarh. PREFACE This report is basically undertaken to meet two main objectives. The first serves to bridge the gap between practical aspects & theoretical knowledge. The second being the syllabus requirements for the post graduate degree in Commerce (M.Com) course of Panjab University, Chandigarh. As a part of M.Com, a student has to pursue a project duly approved by the director of the institute. I had the privilege of
  4. 4. undertaking a project on ³Comparative Analysis of Nestle V/S Cadbury´At ³Nestle India Ltd.´ This project was undertaken to make the analysis of financial statement & also to get an experience of working with the concern itself. This project is divided into ³12 Chapters´ which cover different aspects relating to this project. I hope that this project gives the reader an overview about Analysis of financial statements of ³Nestle India Ltd.´ & ³Cadbury´: CHAPTER 1 Deals with Introduction & History of Nestle in detail. CHAPTER 2 Deals with Nestle in India. CHAPTER 3 Deals with Introduction & features of Moga Factory. CHAPTER 4 Deals with Introduction, History, Products, Brands & Historical Development of Cadbury in detail. CHAPTER 5 Deals with Objectives of Analysis of financial statements. CHAPTER 6 Deals with Ratio Analysis. CHAPTER 7 Deals with SWOT Analysis. CHAPTER 8 Deals with Best Performing Firm with Reasons. CHAPTER 9 Deals with Research Methodology. CHAPTER 10 Deals with limitations & findings of study. CHAPTER 11 Deals with Appendix containing Financial Statements. CHAPTER 12 Gives an idea about Websites visited & Book referred. TABLE OF CONTENTS Chapter No. Description Page No
  6. 6. NESTLES PROFILE Nestle India is a multinational company with its worldwide operations in over 84 countries. Nestle is the world¶s largest food company with its international headquarters at Vevey, Switzerland. Nestle has almost 500 factories world wide out of which 220 are located in Europe, 150 in America and 130 in Africa, Asia and Oceania. It employs almost 2,30,000 people. Founder of Nestle was German born ³Henry Nestle´ who was living in a small town of Switzerland named ³Vevey´. From a modest beginning he founded the company in 1866 at Switzerland for manufacturing milk powders for babies. ³Necessity is mother of invention´ is applicable in the invention of a special food product ³Farine Lactee´ made from Cereals & milk to saved the lives of many infants because, at that time Switzerland faced one of the highest infant mortality rate & the milk formula act as nectar that saved the lives of many infants whose mothers were un-able to breast feed successfully. Since than Company have always looked forward and have achieved set targets & goals. At present Nestle is the world¶s largest food company, with its international head quarters at Vevey, in Switzerland. Nestlé is often quoted by most as ³Multinational of Multinationals.´ There is a good reason, as less than 2% of the turnover comes from domestic market in Switzerland. Nestlé is very much decentralized in its operations & most of the markets are given considerable autonomy in its operation. It is more of a people & products oriented company rather than systems oriented company. There are ³unwritten guidelines´ which are to be followed, based on common senses & a strong set of moral principals emphasizing a lot of respect for fellow beings. Nestle has always adapted to the local conditions and at the same time integrates its Swiss heritage. It has always taken a long-term view in the countries in which it operates. Therefore, one can see a lot of investment R&D and risk taken in new product areas. There is a great emphasis placed on training by the company. It believes in rewarding and promoting people from within. Today its product brand name µNestle¶ is associated with µquality products¶ in worldwide consumer markets. NESTLE
  7. 7. THE NEST When Henry Nestle introduced the first commercial infant formula in 1867, he also created a symbol of the ³Bird¶s Nest´, graphic translation of his name, which personifies the company¶s business. The symbol, which is universally understood, evokes security, motherhood and affection, nature and nourishment, family and tradition. Today it is the central element of Nestlé¶s corporate identity and closely parallels the company¶s corporate values and culture. PLANT LOCATIONS Moga (Panjab) : Milkmaid,Culinary,Cerelac,1962 Choladi (Tamilnadu) : Instant Tea Export ,1969 Nanjangud (Karnatka) : Coffee & Milo ,1989 Samalkha (Haryana) : Cereals, Milkmaid Deserts ,1992 Ponda (Goa) : Chocolates & Confectionery, 1995 Bicholim (Goa) : Noodles and Cold Sauces, 1997 Pant Nagar (Uttaranchal) : Noodles and Coffee,2006 Beginning with its first investment in Moga(Panjab) in 1961. Other factories were set up at Choladi (Tamil Nadu) in 1969, at Nanajangad (Karnataka) in 1989, at Samlakha (Haryana) in 1992, at Ponda(Goa) in 1995, at Bicholim (Goa) in 1997. Nestle India is now putting up the 7th factory at Pant Nagar in Uttaranchal. PRODUCT RANGE OF NESTLÉ Its activities include manufacturing and marketing of: - y CONDENSED MILK y POWDERED MILK
  8. 8. y ICE CREAMS y OTHER DAIRY PRODUCTS y INFANT FOODS y CHOCOLATES & CONFECTIONERY ITEMS y TEA & COFFEE y CULINARY PRODUCTS y FROZEN PRODUCTS y FRUIT JUICES y MINERAL WATER y PET FOODS y PHARMACEUTICALS AND COSMETICS NESTLE`S ORGANIZATION Some names seem to belong to legend and Nestlé now synonymous with a prestigious trademark and world¶s foremost food group originally consisted of two companies Henri Nestle of Vevey Switzerland & Anglo Swiss Condensed Milk Company in Cham. Both companies competed vigorously from 1866- 1905. These groups merged in 1905 and become the starting point of the recent food group with development of different products as well as acquisitions, mergers and purchasing of interests in other companies. Nestle is now the No. 1 food company in the world. It is present on all five continents has an annual turnover of nearly 80 Billion Swiss Francs. At present there are around 500 factories in around 84 countries with 200 operating companies, One basic research center & 17 technological development groups and has in excess of 200,000 employees. Currently Mr. PAUL STIENKAMP is controller the Nestlé group. Nestlé operations worldwide are divides into 3 zones: y ZONE EUR : Europe y ZONE AOA : Asia and Oceania y ZONE AMS : Americas
  9. 9. India comes under zone AOA which includes South- East Asian trading giants of the likes of Thailand, Indonesia, Malaysia, Singapore, China etc. ORGANISATION STRUCTURE OF |NESTLE INDIA LTD.} (MOGA) NESTLE IN INDIA Nestle set up its operations in India, as a trading company, in 1912. It began trading as ³Nestlé Anglo-Swiss Condensed Milk Company (Export) Ltd.´ for importing &selling finished products in the Indian market.
  10. 10. After Independence in 1947, the economic policies of the Indian Govt. emphasized the need for local production. Nestlé responded to India¶s aspirations by forming a company in India & set up its first factory in 15th of November 1961 at Moga (Panjab) to develop Moga as milk economy. The production started with the manufacture of Milkmaid at Moga factory in 1962 & other products were gradually brought into the fold. At present Nestlé has 6 manufacturing units at Choladi (Tamil Nadu), Nanajangad (Karnataka), Samlakha (Haryana), Ponda & Bicholim (Goa) which are successfully engaged in meeting the domestic as well as the exports demand. Nestlé India is now putting up the 7th factory at Pant Nagar in Uttaranchal. Among them Moga factory is the largest and the oldest producing the widest range of food products. The corporate office is located at Gurgaon & the registered office at M-5A, Cannaught Circus,New Delhi. Nestlé has been a partner in India's growth for over nine decades now and has built a very special relationship of trust and commitment with the people of India. The Company's activities provide direct & indirect employment & livelihood to about one million people including farmers, suppliers of packaging materials, services and other goods. NESTLÉ HAS SEVEN FACTORIES IN INDIA MOGA FACTORY Moga factory started production in 1962. It contributes almost 75% of Nestlé¶s total production volume, manufacturing 80,000 tons of food products & employs 1500 people. The entire range of milk, culinary products, cereals & vending mixes is manufactured in Moga. CHOLADI FACTORY The factory in Choladi started production in 1967, situated in south India, about 275 kms. from Bangalore. The factory today has 80 employees. It processes about 500 tons of instant tea, coffee which is all exported.
  11. 11. NANJANGUD FACTORY In Nanjangud factory production started in 1989 with manufacturing of Nescafe Sunrise. Milo manufacture at Nanjangud began in 1996.It is situated 160 kms south of Banglore, the factory has 245 employees. Coffee capacity currently is 15,000 tons and Milo 3000 tons p.a. SAMALKHA FACTORY Samalkha factory started production in 1993, it is situated 70 kms from Delhi and it has 203 employees & manufactures about 11,000 tons of food products comprising Cerelac, Nestum & Ethnic deserts. Pure Life, treated water & Nestlé Dahi are also being produced here. PONDA FACTORY Ponda Factory began production of Kit Kat in 1995.It currently employees 140 people. It is located 40kms from Panjim, capital city of Goa. It has been expanded into other confectionery products comprising Jellies Pastilles, & Chocolate based confectionery. BICHOLIM FACTORY Bicholim Factory, a satellite factory of Ponda(Goa) began production in 1997. Noodles & Cold Sauces are manufactured here. PANT NAGAR FACTORY This factory is situated in Pant Nagar of Uttranchal. Noodles & other culinary products are manufactured here. India has the co ±packing arrangement in: y Nestle Polo-Bakeman¶s (Nagpur) y Chocolates-Campo (Puttur) y Tasters Choice±Williamson Major company (silliguri) y Toffee-Nutrine (Sunder Nagar) y Pickles-Choride foods Ltd. (Puna) y Cold sauce 200 gm. ± Nijjer Agro Pvt.Ltd. (Amritsar) y Dosa & Samber mix ± Indian foods & fermentation Ltd. (Nagpur)
  12. 12. MOGA FACTORY ESTABLISHMENT Moga is located in the Malwa region of Punjab State, about 400kms. North of New Delhi. It is popularly known among the famous grain markets of the world. In 1959, Nestlé took a decision to establish milk processing factory at Moga town for economic & social development of the area. Moga factory was established in 15th Nov.1961 & the production commenced in early 1962. Initially it was started as a small Milk Factory manufacturing milk product ³Milkmaid´. Thereafter, with passage of time there has been a continuous & rapid expansion in the factory. ³Nestlé India Ltd.´ was formally incorporated in 1978 & prior to which the manufacturing license was issued in the name of ³Food Specialties Ltd.´ After 28 Years of the company it was realized that in order to survive in the international competition and to keep up with the changing time a better and closer relationship was required between Nestlé International and its Indian counterpart. So in 1990 a unified production & marketing front, under the name of ³Nestlé India Ltd.´ was conceived. Today, Moga Factory is one of the largest Nestlé Factories in the World in terms of Area, Product range, Manpower, etc. It contributes 75-80 % of the total production volume of Nestlé producing 80,000 tons of high quality products p.a. The factory buildings are spread over an area of 57 acres. It employs about 1600 men & women. It deals with over 85,000 farmers in 1025 villages for collection of milk through Milk agencies. The credit of bringing this town on the industrial map of the world goes to ³Nestlé ± The World Food Company´ engaged in the largest food processing operations in the world. SALIENT FEATURES OF MOGA FACTORY
  13. 13. Nestle India Ltd. (Moga Factory) is the oldest & largest factory among 500 Nestle Factories worldwide with a layout spread over nearly 57 acres & having three major plants within the factory. The factory consists of production plants as under: 1. MILK OPERATIONS 2. POWDER FILLING & PACKING 3. CEREALS 4. INSTANT DRINKS (VENDING MIXES) 5. CULINARY These plants are briefly described as follow: 1. MILK OPERATIONS This plant has many sub- plants engaged in the processing of milk & all the related activities that take place in Moga Factory includes Fresh milk reception, Ghee plant, De - odourisation plant, Liquid plant, Egrons 2. POWDER FILLING PLANT The filling & packing of milk like Everyday, Lactogens, Nestogen and Cerelac Tin is done in this plant. 3. CEREALS This plant is engaged in the production of cereal-based baby foods. The production process consists of the addition of various Enzymes, Vitamins, Minerals & Fruit extracts as Wheat, Apple, Orange & Vegetables to the cereal base. 4. INSTANT DRINKS This plant is engaged in the filling of vending pre - mixes. 5. CULINARY This plant is engaged in the production of Noodles, Tastemakers, Soups, Sauces & the like. The plant is divided into three sections: a. NOODLES b. SEASONING c. COLD SAUCES
  14. 14. d. NOODLES It is one of the major plants of Nestle. Manufacturing of Noodles is semi automatic process consists this procedure. Tipping of wheat flour in the hoppers at the start of the line, Mixing of dough releasing on the line, Sheet formation with the help of rollers, Strand formation, Steaming, Frying in oil, Cooling, Wrapping cakes in sachets along with tastemaker, Palestine of cakes. a. SEASONING The seasoning section is engaged it the production of Taste marker, Soups & spice for use in cold sauces. Main products are as follow: y Maggi Taste Makers y Sweet & Sour y Maggi soups (Chicken, Tomato, Mushroom & Vegetable) y Maggi Super Seasoning y Mango Wonder-Mix y Maggi Export Mixes. e. COLD SAUCES This section is engaged in the manufacturing of a whole range of Sauces under the brand name of ³Maggi´. Main products of this line are: y Tomato Ketchup y Hot-N-Sweet y Masala Chilli y Chili Garlic y Italian Pizza Popping MAJOR DEPARTMENTS IN MOGA FACTORY y Human Resources Department y Production Department
  15. 15. y Purchase Department y Accounts & Administration Department y Personnel Department y Quality Assurance Department y Security Services y Industrial Engineering Services y Utility Services y Warehouse y Field Service y Factory Industrial Performance Department IMPORTANT BENEFITS & FACILITIES PROVIDED TO THE EMPLOYEES BY NESTLE CANTEEN The factory canteen provides lunch & dinner prepared under hygiene conditions for all employees at a subsidized rate against a coupon. In addition tea/coffee is served free of cost during specified break timings. UNIFORMS All employees are required to be in complete uniform specified. Uniform consists of a Pant, Shirt & Cap/Turban for each department. LAUNDRY The laundry is located near the main canteen. Neat, clean & ironed clothes can be collected from laundry during specified hours. DISPENSARY AND HEALTH CARE
  16. 16. The Company has a Dispensary with a full time Pharmacist and a visiting Doctor to provide treatment of minor ailments & First aid in case of accidents. The health record of employees is maintained in the medical card kept in the Dispensary including Blood Group. ACCIDENTS/FIRST-AID BOXES All departments are equipped with First ±Aid Boxes which can be used in case of an accident or minor ailment. In case of serious accident/emergency the employee is shifted to a near by hospital. MEDICAL SCHEME The company covers the medical expenses & reimbursement of the hospitalization expenses of all eligible employees, in case they are hospitalized, within prescribed limits. INFANT FEED SCHEME Nestlé provide infant foods free of cost to the newborns of its permanent employees only where breast-feeding is not possible. For this a doctor¶s prescription, birth certificate with a prescribed format of the newly born is required to be submitted to the H.R.Deptt. This facility can be availed during the child¶s first year of age and the facility continues for 48 weeks after that first week in which the feed is obtained. STAFF SALES Nestle provide a standard discount rate of 10% on the wholesale price of its products to the employees. The Staff sale shop is located near the factory gate, stocks all the products marketed by firm. The employees can purchase products after obtaining the staff sale card from the H.R.Deptt. LOCKERS AND REST ROOMS Each employee is given a locker to keep his uniform & other clothes. Money or valuables should not be kept there. Lockers are issued against codes which are provided with Showers, lavatories & resting place for break. Separate lockers & rest rooms are available for female employees.
  17. 17. LEAVES Three types of leave are granted to employees: y Earned Leave y Sick Leave y Casual Leave RETIRAL BENEFITS Retrial benefits are provided on retiring from the job on completion of 60 years of age: y Provident Fund And Family Pension Scheme y Employees Deposit Link Insurance y Gratuity y Company Pension Scheme CONTRIBUTION OF NESTLE TOWARDS ECONOMIC & SOCIAL DEVELOPMENT Nestlé India Ltd. is not only an industrial & a commercial house but has made sustained efforts to improve economic and social environment of the people in the area. The credit of bringing this town on the industrial map of the world goes to Nestlé ± The World Food Company. ENVIRONMENTAL RESPONSIBILITIES: The company is highly conscious about its Environmental Responsibilities & uses various methods to create awareness among employees & consumers about their responsibilities towards environment. Factory has been awarded a Certificate from the ³Punjab State Pollution Control Board´ for air & water discharge. An Environmental Committee has been constituted to study, monitor operations & activities within the firm. CONSTRUCTION OF FACILITIES FOR DRINKING WATER: The Company is helping with construction of facilities for drinking water in village schools of district. Drinking water project involves sinking deep bore wells, construction of proper storage facility & imparting water education to the village
  18. 18. school students. So far 44 drinking water projects have been completed & benefiting over 15000 village students. ASSISTING DAIRY FARMERS IN INDIA: Through assistance to farmers Nestlé has helped to raise the quality, hygiene & value of the milk. It improves people's health, lifestyles and the region's economy. Investment Milk Collection centers with proper facilities are established & farmers are advised on good breeding, feeding practices, and on the health of dairy herds. NESTLÉ AGRICULTURAL SERVICES: Nestlé's provide Agricultural Services to educate, advice & provide the services to the farmer to increase the yields of crops and dairy herds. Special camps are organized for the awareness of farmers about new innovations to improve the quality & hygiene of the milk produced. FRESH MILK COLLECTION SYSTEM & PRICING POLICY: Company has opened milk collection centers with facilities to test fresh milk & preserve samples in all villages falling within its district. Fresh milk samples are tested in the presence of farmers & preserved milk samples are tested in the lab of the factory. Milk payment is based on the quantity of milk, fat (%) & gross amount. Milk payment is computerized & directly made to the farmers with a slip which carries detail of milk supplied by them. EXTENSION EDUCATION: Every year seminars are organized in collaboration with Punjab Agriculture University (PAU) Ludhiana to provide information to the farmers relating to dairy farming, fodder production, animal health, breeding, clean milk production etc. ³Changi Kheti´± a PAU publication is also made available to the farmers free of cost. COMMUNITY SERVICE: The company is also doing a lot of community service. In Sept. 1988, when floods caused havoc in Punjab, the company & the concerned people organized Langar (free food) at three most effected areas in region which continued for fifteen days. Green & dry fodder supplied to the farmers. About 600 animals were vaccinated; medicines and veterinary services were provided to 2000 affected animals.
  19. 19. CADBURYS PROFILE Cadbury is one of the well known names in world of MNC¶S. It is market leader of chocolate confectionery market with a 70% share. Cadbury story shows how a small family business developed into an international company, combining the most sophisticated technology with highest standards of quality, technical skills & innovation established by founders. In 1824, a young Quaker, ³John Cadbury´ opened the one-man business selling cocoa & chocolate, in Bull Street, Birmingham, which was to be the foundation of Cadbury Limited, one of the world's largest producers of chocolate. His lifelong involvement provide tea, coffee, cocoa & chocolate as an alternative to alcohol, which was believed to be one of the causes of poverty & deprivation amongst working people. Synonymous with word chocolate, ³Cadbury´ has a unique relationship with consumer. This relationship is underpinned by the powerful visual icons of the Cadbury brands - the Cadbury signature, purple colour, the 'glass and a half' trademark, & the chocolate itself. These all come together to form the brand identity - the Cadbury Master Brand Cadbury is the single largest brand in chocolate on international basis. In 1969 the two great household named Schweppes & Cadbury merged to form ³Cadbury Schweppes plc´. Since then business have been expanded throughout the world by a programme of organic and acquisition led growth. Products of unique brands are producing & selling which give or bring pleasure to millions of consumers around the world every day which is done successfully for over 200 years. This success has been built upon understanding the needs of our consumers, customers and other In 1831 John Cadbury became a manufacturer of drinking chocolate and cocoa, the real foundation of the Cadbury manufacturing business. After that company
  20. 20. receive their first Royal Warrant as 'Manufacturers of cocoa and chocolate to Queen Victoria'. Today Cadbury continues to hold Royal Warrants of appointment. MILESTONES OF CADBURY 1824 John Cadbury, founder of Cadbury, opens his shop in Bull Street of Birmingham selling tea, coffee, cocoa & drinking chocolate, which he prepares himself using a mortar and pestle. 1831 A small factory is rented in Birmingham & John Cadbury becomes a manufacturer of drinking chocolate and cocoa. 1842 John Cadbury is selling 16 sorts of drinking chocolate and eleven cocoas. The earliest preserved price list shows drinking chocolate in cakes and powder. 1847 John Cadbury takes his brother Benjamin into partnership and the family business becomes Cadbury Brothers of Birmingham. A larger factory in Bridge Street, the centre of Birmingham is rented. Mid 1850s Under Prime Minister William Gladstone the British government reduces tax on imported cocoa beans, bringing cocoa and chocolate within the reach of more people. 1854 The Cadbury Brothers receive their first Royal Warrant as 'manufacturers of cocoa and chocolate to Queen Victoria'. Today Cadbury continues to hold Royal Warrants of appointment. 1866 The Cadbury brothers introduce a new process to produce a much more palatable cocoa essence - the forerunner of the cocoa we know today. The plentiful supply of cocoa butter remaining after the cocoa is pressed makes it possible to produce a wider variety of eating chocolate. 1897 Cadbury manufactures its first milk chocolate. 1905 Cadbury's Dairy Milk is introduced with a new recipe using fresh milk. 1915 Cadbury's Milk Tray is introduced. 1920 Cadbury's Flake is introduced. mid- 1920's Cadbury's Dairy Milk gains its status as brand leader in the UK, a position that it has enjoyed ever since. 1930 Cadbury opens a factory in New Zealand. 1932 Cadbury opens factories in Canada & Ireland which compliments the manufacturing strength with other factories around the world. 1938 Cadbury's Roses are launched.
  21. 21. 1939 Cadbury opens a factory in South Africa. 1940's During the war years, cocoa & chocolate products are regarded as essential foods for the forces & civilian population. Rationing continues until 1949. 1947 Cadbury opens a factory in India. 1960's Cadbury introduces the latest technologies and installs specialist plants for milk processing and cocoa bean processing in the UK. 1969 Cadbury Group Ltd merges with Schweppes Ltd to create Cadbury Schweppes plc. MAJOR BRANDS Cadbury, Schweppes, Halls, Trident, Dr Pepper, Pepsi, Red Bull, 7 UP, Mountain Dew, Gatorade Snapple, Trebor, Dentyne, Bubblicious & Bassett - are enjoyed in almost every country around the world. CADBURY IN INDIA In 1947 Cadbury opens a factory in India as ³Cadbury India´ (formerly Hindustan Cocoa Products) which is a subsidiary of Cadbury Schweppes Overseas, UK. The company has expanded the installed capacity of Malted Foods by 700 Tonnes & with this expansion, total capacity has risen to 8600 Tonnes. Company is committed to ethical business practices, fair dealing, honesty & full compliance with laws affecting businesses. In 2004 it was the winner of Britain's most admired company award as voted by other leading businesses. Company has organized into four regions & six global functions. Each region is focused on commercial operations in its geographical & product area, it also maintains teams from each of the six functions. THE REGIONS ARE: y Americas Beverages; y Americas Confectionery; y Europe, Middle East and Africa (EMEA); y Asia Pacific.
  22. 22. Australia & New Zealand are largest markets in the region having leading position in Australian confectionery market, with a 55% market share & in New Zealand with a 43% share. Australia is 11th largest confectionery market in the world. Overall Indian business has a leading presence in chocolate with a 71% market share, and also sells sugar confectionery. Cadbury opens factories in New Zealand, Canada, South Africa & Ireland which compliments the manufacturing strength with other factories around the world in Malaysia, Africa, Jamaica, France, Spain, South America, Germany, Australia, India, Japan, Thailand, China & Singapore. FACTORIES & REGIONAL OFFICES IN INDIA Cadbury has four factories & seven Regional offices in India as follow: PLANT LOCATIONS: y Thane (Maharashtra), y Induri (Maharashtra), y Baddi (H.P.) y Malanpur (M.P). Out of which Induri Farm is a wholly-owned subsidiary of the company which exports malted foods & chocolates to the Gulf & Asian countries. Cadbury employ around 50,000 people. REGIONAL OFFICES: Cadbury has seven ragional offices in following cities: y Delhi y Kolkatta y Mumbai y Kerala y Chennai y Banglore y Cochin
  23. 23. The company has received permission from the RBI for payment of royalty of 1% on domestic and exports sales for use of Trade Marks to Cadbury Schweppes Overseas, UK. KEY PRODUCTS OF CADBURY y Dairy Milk (largest selling chocolate in the country) y 5 Star y Gems y Dairy milk Choclate y Coated wafer biscuits y Malted food y Sugar confectionery y Cadbury Roses. y Cadbury Fruits y Cadbury desserts. y Perk y Eclairs. y Dollops (1989) y Drinking chocolate y Malted foods y Cocoa powder Today, Cadbury is the clear leader in U.K chocolate confectionery market with over 50 brands & 350 packaging variations to meet every need & occasion. Currently Mr. C.Y.Puri is chairman of the company. Building on our existing strong reputation with our employees and society, to focus on creating a cohesive and talented workforce. The Company will continue to work to our high standards of corporate and social responsibility both in the way the company conducts their business, and in our products and the way Cadbury sell them. In 2005-06 company is trying to concentrate on improving the business planning in areas Sales & Operations, Planning & Logistics, Customer Operations. In achieving this goal company will require further changes to the supply chain & IT capabilities. Each function has a central team based at Group Headquarters & regional presences which are coordinated by the central team. This enables to focus on top-line growth & allows the functions to develop global strategies & processes towards best in class performance.
  24. 24. OBJECTIVE OF ANALYSIS OF FINANCIAL STATEMENTS Analysis of financial statements is systematic process of the critical examination of financial information contained in the financial statements in order to determine financial strengths & weaknesses of the firm. As a doctor examines his patient by recording his body temperature, b.p.etc. before making conclusion regarding illness & before giving treatment. Similarly, objective of such analysis is to diagnose the information contained in financial statements (B/S, income statement, ratios, stock prices to judge the profitability & financial soundness of the firm with various tools of analysis before commenting to understand the working & following informations: y Profitability y Liquidity y Productivity of assets y Goodwill y Cash management y Solvency of the firm y Financial soundness y Strengths & weaknesses of the firm. y To study relationship between different statements. Thus analysis of financial statements means such a treatment of information contained in the financial statement so as to afford a full diagnosis of the profitability and financial position of the firm concerned. METHODS OF FINANCIAL ANALYSIS Various methods are used for analysis of financial statements and result of operations as well. It helps in predicting about the firm¶s position. The following are main methods used for financial analysis of financial statements: o RATIO ANALYSIS o TREND ANALYSIS
  25. 25. o FUND FLOW ANALYSIS o CASH FLOW ANALYSIS o COMPARATIVE STATEMENTS o COST-VOLUME-PROFIT ANALYSIS o COMMON ­ SIZE STATEMENTS. RATIO ANALYSIS A ratio is a simple arithmetical expression of the relationship of one number to another. It is one of the most powerful techniques of financial analysis. In finance, ratio is used as a bench mark for evaluating the financial position & performance of the concern. It expresses quantitative relationship between figures & group of figures. It is the process of establishing & interpreting various ratios for helping in making certain decision. With help of ratios financial statements can be analyzed more clearly & decisions can be made from such analysis. It is not an end in itself but a means of better understanding of financial strengths & weaknesses of the firm. There are a number of Ratios which can be calculated from information given in financial statements. It may be defined as relation of one amount(a) to another(b) which can be expressed as ratio of a to b, a : b (a is to b), or as a simple fraction, integer, decimal, fraction or percentage(%) ACCORDING TO ACCOUNTANTS HANDBOOK BY WIXON KELL & BEDFORD ³A ratio is an expression of the quantitative relationship between two numbers´. NATURE OF RATIO ANALYSIS Ratio Analysis is a technique of analysis and interpretation of financial statements. It is a means of better understanding financial strengths and weaknesses of a firm are company. The financial statements of business enterprises bring out the absolute figures which will be too lengthy to remember and come to meaningful conclusions. The institutions conduct an inter-firm comparison at the time of appraisal and also a
  26. 26. comparison of past with present. The ratios bring absolute figures closer to judgment as certain benchmarks in ratio¶s based on experience are set as standards. The absolute figures as such may not indicate any thing. The ratios provide information about financial position of a concern. These are pointers or indicators of financial strength, soundness, position or weakness of an enterprise. STEPS INVOLVED IN RATIO ANALYSIS: y SELECTION: Selection of relevant data from the financial statement depending upon the objective of the analysis. y CALCULATION: Calculation of appropriate ratios from the data. y COMPARISON: Comparison of the calculated ratios with the ratios of the same firm in the past/ratios of some other firms or with ratios of the industry to which the firm belong. y INTERPRETATION: Interpretation of ratio is most important factor without which collected data does not convey any sense. Interpretation needs skill, intelligence & foresightedness. USE & SIGNIFICANCES OF RATIO ANALYSIS: MANAGERIAL USES OF RATIO ANALYSIS: It is helpful for managers in Financial forecasting-planning, decision making,Communicating,Controlling Co-ordination, Analysis & interpretation. UTILITY TO SHAREHOLDERS: Investors want to know about financial position of firm before investing for security of his investment & return in form of dividend /interest. UTILITY TO CREDITORS: Creditors/Suppliers extend short-term loan to the concern so financial position of firm warrants their payments at time. UTILITY TO EMPLOYEES:
  27. 27. Profitability of firm enables employees to put forward their viewpoint for increase of wages & other benefit. UTILITY TO GOVERNMENT: Govt. may base its future policies on basis of information of units in private sector & to submit audit report for tax purposes. LIMITATIONS OF RATIO ANALYSIS 1. LACK OF ADEQUATE STANDARDS: There are no well accepted standards or rules of thumb for all ratios to be accepted. It makes interpretation of ratios difficult. 2. INHERENT LIMITATIONS OF ACCOUNTING: Like financial statements, ratios also suffer from inherent weakness of accounting records such as their historical nature. Ratios of past are necessarily not true indicators of future. 3. WINDOW DRESSING: Financial statements can easily be window dressed to present a better picture of its financial and profitability position to outsiders. Hence one has to be very careful in making a decision from the ratios calculated from such financial statements. 4. PERSONAL BIAS: Ratios are only means of financial analysis and not an end in itself. Rations have to interpret and different people may interpret the same ratio in different ways. 5. HISTORICAL ANALYSIS: - Financial statement analysis is historical analysis. It analysis what had happened till date .It does not reflect the future. Persons like shareholders, investors etc. are more interested in knowing the likely position in future.
  28. 28. FUNCTIONAL CLASSIFICATION OF RATIOS 1. Current Ratio 2. Liquid Ratio 3. Absolute Liquid Ratio 1. Debt Equity Ratio 2. Debt to Total Capital Ratio 3. Cash Flow 4. Capital Gearing 1. Inventory Turnover Ratio 2. Debtor¶s Turnover Ratio 3. Fixed Asset Turnover Ratio 4. Total Asset Turnover Ratio 5. Working Capital Turnover Ratio 6. Payable Turnover Ratio 7. Capital Employed 8. Turnover Ratio (A) In relation to Sales : 1. Gross profit ratio 2. Net profit ratio 3. Operating ratio 4. Operating profit ratio 5. Expense ratio (B) In relation to Investment: 1. Return on investment 2. Return on capital 3. Return on equity capital 4. Earning per share 5. Price-Earning ratio LIQUIDITY RATIOS
  29. 29. Liquidity ratio measures the ability of firm to meet its current obligations as and when they become due & firm ensures that it does not suffer from lack of liquidity or excess of liquidity. Lack of sufficient liquidity will result in poor credit worthiness, legal tangles, loss of creditor¶s confidence or even resulting in closure of the company. High liquidity is also bad, Idle assets earn nothing. Therefore it is necessary to strike a proper balance between high liquidity & lack of liquidity. Liquidity Ratios are: o CURRENT RATIO o LIQUID RATIO o ABSOLUTE LIQUID RATIO o INTERNAL MEASURE CURRENT RATIO Current ratio is measure of firm¶s short-term solvency. It is a measure of general liquidity & widely used for analysis of financial position of a firm. It defines the relationship between current assets & current liability. Current Ratio = Current Assets Current Liabilities YEAR COMPANY 2001 2002 2003 2004 2005 Nestle 0.74 0.84 0.92 0.60 0.68 Cadbury 1.76 1.83 1.73 1.24 0.91 ANALYSIS (NESTLE INDIA LTD V/S CADBURY)
  30. 30. Generally, Current ratio of 2:1 is considered satisfactory. A firm should ensure that it does not suffer from lack of liquidity. Above table & graphical representation of Nestle & Cadbury is showing that ratios of both the companies have a declining trend. No one of the ratios is nearer to the rule, but financial position of Cadbury is still better than Nestle. So, Nestle should try to improve its current financial position. QUICK RATIO This ratio establishes a relationship between quick/liquid assets and current liabilities. An asset is liquid if it can be converted into cash immediately or reasonably soon. Quick/Liquid/Acid Test Ratio = Current assets ± Inventories YEAR COMPANY 2001 2002 2003 2004 2005 Nestle 0.26 0.29 0.32 0.23 0.31 Cadbury 1.26 0.75 1.00 0.49 0.40 Current liabilities ANALYSIS (NESTLE INDIA LTD V/S CADBURY As rule of thumb or as a convention a quick ratio of 1:1 is considered to represent satisfactory current financial conditions. Less than 1:1 ratio shows that inventories are higher. Inventories are considered to be less liquid. From the data & graph we analyze that the quick ratio of Nestle is not satisfactory as compared to Cadbury. It shows that Nestle has high inventory, which is less liquid. So, company has to depend on sales in order to meet its immediate obligations. ABSOLUTE LIQUID RATIO Absolute liquid ratio includes cash in hand & cash at bank &marketable securities or temporary investments. The ratio of 1:2 is acceptable. Absolute liquid ratio = Absolute liquid assets YEAR 2001 2002 2003 2004 2005
  31. 31. COMPANY Nestle 0.011 0.014 0.024 0.015 0.053 Cadbury 0.27 0.43 0.26 0.06 0.08 Current liabilities ANALYSIS (NESTLE INDIA LTD V/S CADBURY Generally absolute liquid ratio of 1:2 is considered to represent satisfactory current financial conditions.Re.1 worth absolute liquid assets are considered adequate to pay Rs.2 worth C. Liabilities in time. As shown in above data & graph we can analyze that absolute liquid ratio of Nestle & Cadbury is not satisfactory according to rule. It shows that Cadbury is in better position than Nestle. So, company should try to improve its liquidity position to meet its immediate obligations. SOLVENCY RATIOS ³Solvency´ refers to ability of concern to meet its long term obligation. Long- terms creditors (debentures holders, financial institutions etc.) are interested to know about ability of firm to pay regularly interest on borrowings & repayment of principal amount. Ratios are calculated to know about financial risk and ability of the firm using debts to shareholder¶s advantage. Solvency ratios are as follow: y SOLVENCY RATIO y PROPRIETORY RATIO y DEBT EQUITY RATIO SOLVENCY RATIO This ratio indicates the relationship between total liabilities to the outsiders & total assets of the firm. Lower the ratio, more satisfactory or stable is the long-term solvency position of a firm. Solvency Ratio: = Total Liabilities to outsiders
  32. 32. Total Assets YEAR COMPANY 2001 2002 2003 2004 2005 Nestle 66.7 63.2 65.7 66.2 66.4 Cadbury 52 71 52.73 49.48 46.86 ANALYSIS (NESTLE INDIA LTD V/S CADBURY) Ratios indicate relationship between total liabilities & total assets of a firm. Normally lower the ratio, more satisfactory or stable is the long-term solvency position of a firm & according to this rule; ratios of Cadbury are lower than Nestle which shows that solvency position of Cadbury is more satisfactory. Nestle should try to improve its Long-term solvency or to decrease its liabilities. PROPRIETORY RATIO This ratio establishes the relationship between shareholders funds to total assets of firm. Proprietory Ratio = Shareholder¶s funds Total assets YEAR COMPANY 2001 2002 2003 2004 2005 Nestle 33.3 36.8 34.3 33.8 33.6 Cadbury 48 29 47.27 50.52 53.14 ANALYSIS (NESTLE INDIA LTD V/S CADBURY) This Ratio is very important for determining long term solvency of a firm. Higher the ratio or the share of the shareholders in the total capital of the company, better will be the long term solvency of a firm. This ratio represents the relationship of owners fund to total assets. From Data & Table defined above ratios of Cadbury is
  33. 33. higher than Nestle which shows that solvency position of Cadbury is better than Nestle. So, Nestle should try to improve its Long-term solvency. DEBT EQUITY RATIO Debt equity ratio also known as External-Internal Equity Ratio is calculated to derive an Idea of claims of outsiders & Owners. The ratio is sufficient to assess the soundness of long term financial position. Debt equity ratio = External Equities Internal Equities YEAR COMPANY 2001 2002 2003 2004 2005 Nestle 2 1.72 1.92 1.96 1.97 Cadbury 0.6 0.4 0.3 0.4 0.5 ANALYSIS (NESTLE INDIA LTD V/S CADBURY) Debt equity ratio indicates the proportion between shareholders fund & the long terms borrowed funds. Higher ratio indicates risky financial position while lower ratio indicates safer financial position. Ratio of 1:1 is considered as satisfactory. Ratio in above data & graph indicates that ratio of Nestle is high than Cadbury. Higher ratio of Nestle represents risky financial position while lower ratio of Cadbury indicates safer financial position. Nestle should try to improve its soundness of long term financial position. ACTIVITY RATIOS This ratio is used to evaluate the efficiency of a firm to manage & utilise its assets. Funds of creditors & owners are invested in various assets to generate sales & profits. Better the Mgt. of assets, larger is the amount of sales & profit. Activity ratios involve a relationship between sales and assets. y INVENTORY TURNOVER y INVENTORY CONVERSION PERIOD
  34. 34. y DEBTORS TURNOVER y AVERAGE COLLECTION PERIOD RATIO INVENTORY TURNOVER RATIO Inventory turnover ratio indicates the efficiency of the firm to manage its Inventory. Every firm has to maintain sufficient level of Inventory to meet the requirements of business. It shows how rapidly the inventory is turning into receivable through sales. Inventory turnover ratio = Sales Inventory YEAR COMPANY 2001 2002 2003 2004 2005 Nestle 10.39 9.3 8.9 9.65 10.2 Cadbury 10.06 11.66 10.27 9.17 10.03 ANALYSIS (NESTLE INDIA LTD V/S CADBURY) Inventory turnover ratio indicates the efficiency of the firm in producing and selling its product. High inventory turnover indicates efficient management of inventory & vice versa. Above data & table is showing that inventory turnover ratio is increasing. It shows the sales of the company are increasing. But there is close competition between the both firms. Average position of Cadbury is better than Nestle which is now at improving stage & doing well. INVENTORY CONVERSION PERIOD It represents average no. of days for which a firm has to wait before receivables are converted into cash. Inventory conversion period = Days in a year Inventory turnover ratio
  35. 35. YEAR COMPANY 2001 2002 2003 2004 2005 Nestle 35 39 41 38 36 Cadbury 36 31 36 40 36 ANALYSIS (NESTLE INDIA LTD V/S CADBURY) There is no rule of thumb or convention for interpreting the inventory conversion period. Normally low period indicates less investment in inventory or quick movement of inventory. Longer the period, larger will be the chances of bad debts. As shown in above data & table inventory conversion period of both the firms is decreasing. It shows equal inventory conversion period in 2005. But overall performance of Cadbury is better than Nestle. Nestle is now at improving stage & doing well because of its efficient management. DEBTORS TURNOVER RATIO Debtors turnover ratio indicates the number of times the debtors are turned over during a year. Generally, higher the value of Debtors turnover the more efficient is the Mgt. of debtors/sales & vice versa as credit is most important element for sales promotion. Debtors turnover ratio = Net Credit Annual Sales YEAR COMPANY 2001 2002 2003 2004 2005 Nestle 33 61 73 82 84 Cadbury 31.71 32.86 32.91 36.35 57.06 Average Trade Debtors ANALYSIS (NESTLE INDIA LTD V/S CADBURY) Above table & graph indicates that Debtors turnover ratio of Nestle is higher than Cadbury. Both the firms represent increasing trend in ratios, which shows efficiency
  36. 36. of Management of debtors/sales. But both the firms should keep in mind & precautions should be used because, higher the ratio more are the chances of bad debts. Otherwise shows satisfactory position. AVERAGE COLLECTION PERIOD RATIO It represents the average no. of days for which a firm has to wait before its receivables are converted into cash. Average collection period ratio = No.of working days Debtors turnover ratio YEAR COMPANY 2001 2002 2003 2004 2005 Nestle 11 6 5 4 4 Cadbury 11 11 11 10 6 ANALYSIS (NESTLE INDIA LTD V/S CADBURY) It measures quality of debtors. Generally, shorter the period, better is the quality of debtors as collection period implies quick payment by debtors. Moreover, longer the period larger are chances of bad debts. Above data & table indicates that the average collection period of Nestle is very short as compared to Cadbury which is now at improving stage as longer period indicates larger chances of bad debts. Now both the companies are trying to improve their position. PROFITABILITY RATIOS Profit is engine that drives the business enterprise. Primary objective of a company is to earn sufficient profits to survive & grow over long period of time & to contribute towards the social welfare of the society. The profitability ratios are calculated to measure the operating efficiency of the company.
  37. 37. Profitability ratios are :- y GROSS PROFIT MARGIN y NET PROFIT MARGIN y DIVIDEND/ PAYOUT RATIO y EARNING PER SHARE y DIVIDEND PER SHARE GROSS PROFIT RATIO The G/P ratio reflects the efficiency with which management produces its products. Higher the G/P ratio better will be the results & vice versa. Gross profit Margin Ratio = Sales ±COGS Sales YEAR COMPANY 2001 2002 2003 2004 2005 Nestle 20.6 20.6 16.2 20.2 21 Cadbury 42.04 38.32 47.25 45.27 47.26 ANALYSIS (NESTLE INDIA LTD V/S CADBURY) The higher the G.P. ratio, the better is the company¶s financial position. Gross profit is a reliable guide to the adequacy of selling prices and efficiency of trading activities. It is seen from the data that G.P ratio of Cadbury is high as compared to Nestle. It
  38. 38. maintains a cost G.P. ratio, which is a good sign. Moreover there is an increasing trend, which shows that GOGS has decreased & there are less wastage of resources. It is advised that Nestle should try to do its best to improve the G.P ratio. NET PROFIT RATIO Net profit ratio establishes a relationship between N.P. & sales. It indicates management¶s efficiency in manufacturing, administrative & other activities of the firm. This ratio is the overall measure of the firm¶s profitability. Net profit ratio = Profit After Tax Net Sales YEAR COMPANY 2001 2002 2003 2004 2005 Nestle 12.2 10.7 9.5 11.3 12.5 Cadbury 9.16 5.08 5.52 5.22 4.57 ANALYSIS (NESTLE INDIA LTD V/S CADBURY) Objective of Net Profit ratio is to determine overall efficiency of the business. Higher the Net profit ratio better is the profitability of business. Nestle shows an increasing trend as compared to Cadbury in N.P. Ratio which is a positive sign, & it indicates that the company is operationally efficient. DIVIDEND PAY OUT RATIO The dividend pay out ratio is calculated to find the extent to which EPS have been retained in the business. It is important because ploughing back of profits enables a company to grow & pay more dividends in future. Dividend Pay out ratio = Dividend Per Share Earning Per Share YEAR COMPANY 2001 2002 2003 2004 2005
  39. 39. Nestle 0.73 0.83 0.77 0.95 0.78 Cadbury 0.53 0.54 0.57 0.56 0.57 ANALYSIS (NESTLE INDIA LTD V/S CADBURY) Dividend pay out ratio means how much out of earning per share have dividend per share been paid out. In other words pay out ratio helps in assessing the amount of earnings, which is not distributed to shareholders retained in the business. The data shows a decreasing trend in dividend pay out ratio of Nestle as compared to Cadbury. i.e. the company is retaining the amount in cash. EARNING PER SHARE EPS is a good measure of profitability of the firm on a per share basis. It does not reflect how much is paid as dividend & how much is retained in the business. But as a profitability index it is a Valuable and widely used ratio. EPS = Net Profit After Tax - Preference Dividends Number of Equity shares YEAR COMPANY 2001 2002 2003 2004 2005 Nestle 27.3 21.5 24.72 22.88 28.60 Cadbury 11.78 12.49 12.53 12.66 12.59 ANALYSIS (NESTLE INDIA LTD V/S CADBURY) This ratio is calculated to judge the overall profitability of the enterprise. This ratio helps in evaluating the prevailing market price of share. The trend from the chart shows that Nestle has an increasing profitability as compared to Cadbury. This ratio shows strong position of the company in the market.
  40. 40. DIVIDEND PER SHARE RATIO Shareholders are the real owners of a company & they are interested in the earnings distributed & paid to them as dividend. DPS is calculated to evaluate the relationship between per share paid & market value of the share. DPS = Dividend paid to shareholders No of shares outstanding YEAR COMPANY 2001 2002 2003 2004 2005 Nestle 20 18 14 27 29 Cadbury 20 19 20 20 20 ANALYSIS (NESTLE INDIA LTD V/S CADBURY) DPS ratio is calculated to evaluate the relationship between per share paid & market value of the share. Higher the D.P.S, higher is the confidence of shareholders in the company provided, there is an increase in EPS.We see that D.P.Share ratio of Nestle is showing an increasing trend. So, there is an increase in D.P.Share ratio also.Shareholders will be very much attracted towards this company & will have confidence in this company. SWOT ANALYSIS OF NESTLE V/S CADBURY y STRENGTHS: - Strengths are internal competencies of a firm, particularly in comparison with its competitors. Strengths may encompass the company image, brand image, business
  41. 41. strategies, & functional areas such as marketing, finance, personnel, production & R&D. y Nestlé & Cadbury are world famous food companies producing Quality products. y Access to the Groups of both firms proprietary technology/brands, expertise, the extensive centralized R&D facilities, under the general license agreement. y High quality & safe products, endorsed by companies¶ seal of guarantee at affordable prices. y Company is highly conscious about ³Environmental Responsibilities´. y Strong and well differentiated brands with leading market shares. y Provide its shareholders with rapid growth & a fair return. y Provide its employees challenging & satisfying work environment. y Rules & Regulations set out by the firm is strictly followed by all. y Contribute positively to the society in which we operate. y All the products are produced, tested, & packed hygienically. y Both firms have power to compete with competitors in better way. y Brand names are associated with µquality products¶ in worldwide consumer markets. y Ongoing product innovation to convert consumer insights. y Well-distributed product portfolio. y Integrated and efficiency supply chain. y Distribution structure allows wide reach & coverage in target markets. y Capable and committed manpower resources. y WEAKNESSES: - Weaknesses are those factors which tend to decrease the competencies of firm particularly in comparison with its competitors. Such weaknesses may include poor product quality, poor financial position, lack of R&D back up, obsolete technology, poor distribution system, poor management etc. y Distribution of products from one place to another is costly process y Complex supply chain configuration. y Exports of coffee to Russia constitute a substantial part of overall exports. y Market price of some products are high as compared to other competitors available in market. y OPPORTUNITIES: - y Potential for expansion in the smaller towns & other geographies. y Existing markets not fully tapped Potential for growth through increased penetration.
  42. 42. y Growing trend for ³out of home´ consumption. y Leverage Technology to develop more products that provide nutrition, health and wellness. y THREATS: - y Trend of increased consumer spends on consumer durables resulting in lower spending for FMCG products. y Lower profitabity & mkt. price of shares can affect Goodwill of firms. y Rising prices of raw materials and fuels. y Change in fiscal benefits BEST PERFORMING FIRM FROM SHAREHOLDERS POINT OF VIEW It is difficult to predict the best performing company by considering just one parameter (performance graphs) as different firms have different perspectives. So we need to consider few of the following gauges: 1. Sales/Turnover 2. Net Profit Margin(NPM) 3. Debt-Equity ratio 4. Solvency Ratio 5. DPS(Dividend per share) 6. EPS(Earning per share) ANALYSIS (NESTLE INDIA LTD V/S CADBURY) y SALES: - Sales of Cadbury shows increasing trend than NESTLE. Increase in sales shows that people has more trust in the company. y NET PROFIT MARGIN: - NESTLE shows an increasing trend in NPM as compared to Cadbury which shows less NPM in 2005 as compared to 2004. So, profitability of NESTLE is better. y DEBT-EQUITY RATIO: -Capital structure comprises of how much debt and equity are used for the company. Cadbury shows better & safer financial position of the company than Nestle.
  43. 43. y SOLVENCY RATIO: - As seen from the chart attached Cadbury has more solvent financial position than Nestle. y E.P.S.: - EPS of NESTLE shows increasing trend than Cadbury. So, NESTLE has strong position in this regard. y D.P.S.: NESTLE shows increase in DPS which shows strong market position than Cadbury. REASONS FOR BEST PERFORMANCE MANPOWER DEVELOPMENT: The Company has consistently emphasized the need for improved white-collar productivity. During 2005 as well all Training, Development & manpower policies were aligned to this objective. In parallel, the Company remained committed to providing international and diverse professional to explore the employment. TRADE RELATIONS: The Companies continued to receive co-operation & support from distributors, retailers, suppliers & others associated with Companies as trading partners. The Directors wish to develop strong links with them based on mutuality, respect, trust & co-operation. APPRECIATION: Companies have been able to operate efficiently due to culture of integrity& professionalism. Improvement in all functions& areas ensure efficient utilization of Company's resources for sustainable& profitable growth. CAUTIONARY STATEMENT: Corporate Governance Report, describing the Company's objectives, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws & regulations. DIRECTORSRESPONSIBILITY: According to Section 217(2AA) of Companies Act, 1956, the Directors confirm that in preparation of annual accounts, applicable accounting standards have been followed to give a true & fair view of state of affairs& of profits for that period at the end of the financial year for safeguarding assets& for preventing & detecting fraud. EXPORTS: Export sales have increased positively influenced by the increase in per unit realization in exports due to higher green coffee prices, though partially offset by the shift towards bulk packs.
  44. 44. SUPPLY CHAIN: In the area of supply chain management, the Company continued to build on the base established in previous years. It continued to explore ways to improve efficiencies in supply chain & conducted some experimental pilot projects. The Directors wish hereby to place on record their appreciation of the efficient and loyal services rendered by all staff and work force of the Company, without whose wholehearted efforts, the overall very satisfactory performance would not have been possible. RESEARCH METHODOLOGY Every project requires genuine research. Research in common parlance refers to ³search for knowledge´. Success of any project and getting genuine results from that depends upon the research method used by the researcher. |ACCORDING TO REDMAN & MOORE,} RESEARCH IS A SYSTEMATIZED EFFORT TO GAIN KNOWLEDGE,} The main objectives of Research are: y To bridge the gap between practical aspects & theoretical knowledge. y For better understanding of financial strengths & weaknesses of the firm. y To understand the working & financial position of a business. y To study relationship between different statements from point of view of shareholders. y To know about production procedure adopted by the firm. y To know about contribution of Nestlé towards economic & social development y To know about key focus areas growth and profits y To know the Goodwill/Profitability/Liquidity & Solvency of firm. y To know about Productivity of assets. y To gain familiarity about the contribution of companies towards the development of society. y To know about the facilities provided by companies to its employees. y To gain familiarity with a phenomenon or to achieve new insights into it.
  45. 45. RESEARCH METHODOLOGY FOR THE REPORT Project work used with personal interview. In unstructured personal interview, question were not arranged but kept in mind and asked from respondent to get detailed information. Some questions are open-ended and respondent are set free to give information. The questions were asked such as methods used in preparing financial statements, record keeping, contribution towards environment & society, facilities to employees, history, production policies, production procedure, pricing of different products, modifications, and what people think about different products. NAME OF STUDY DESCRIPTION Data used Primary & secondary data. Source of primary data H.R. Department, Finance Department, Retailers, Consumers, Unstructured Questionnaire. Source of secondary data Newspaper, Books, Magazines, Annual Report, Internet. Time Duration 45 Days. Instruments used Personal interview with unstructured questionnaire. Sample procedure Convenience sampling. Type of questionnaire Unstructured questionnaire. Region Moga (Panjab). LIMITATIONS & PROBLEMS y Predicting the best performing firm by analyzing & considering just one parameter (Data & graphs) is very difficult as different firms have different perspectives. y Ratios may be affected by window dressing means manipulation of accounts to conceal vital facts & to show better position of firm. So, ratio may not be definite indicator of good or bad management y Sometimes people don¶t give appropriate information.
  46. 46. y Financial statement analysis does not reflect the future. y Financial statements are confined to monetary matters alone & quality aspect like quality of mgt., labour force etc. are ignored. y In many situations the financial statements are not free from bias. y Mostly some people act rudely & don¶t want to give information. y Large number of questions were not responded due to busy schedule of company & for secret purposes. y Generally people don¶t respond well for questions like suggestion FINDINGS y As for as awareness is concerned it is fine for all the main products of both the companies. y Both the Companies have cut-throat competition. y Liquidity & Solvency position of Cadbury is better than Nestle. y Profitability ratio indicates that both the firms have strong market. y ³Maggi´ of ³Nestle´ & ³Cadbury Dairy Milk´ of ³Cadbury´ are most popular brands. y Both the companies are MNC¶s & engaged in food processing units. y Chocolates of Nestle are not as popular as chocolates of Cadbury. y As for as health drink mils is concerned people¶s favourite is Bournvita because of its taste and chocolate flavour. y Mostly people consume health drink in the morning.
  47. 47. BALANCE SHEET OF |NESTLÉ LTD.´ As Per Year ended 31st Dec. 2003, 2004 & 2005 (in Millions) Particulars 2003 2004 2005 SOURES OF FUNDS: Capital 964.2 964.2 964.2 Reserves & surplus 2385.8 2229.9 2577.2 LOAN FUNDS Secured 51.0 79.0 143.0 Unsecured 0.00 0.00 0.00 TOTAL 3401.0 3273.1 3684.4 APPLICATION OF FUNDS: FIXED ASSETS Gross Block 7894.5 8381.6 9494.4 Less: Depreciation 3980.8 4409.5 4756.7 Net Block 3913.7 3972.1 4737.7 Capital W.I.P. 139.4 340.9 228.2 INVESTMENT 736.4 1548.6 1044.3 CURRENT ASSETS: Inventories 2194.2 2166.7 2531.0 Sundry Debtors 317.0 261.7 1068.0 Cash & bank Balance 62.9 94.5 366.5 Loans & advances 1549.8 1689.1 1943.3
  48. 48. Less: Current Liabilities & Provisions Current Liabilities+ 2978.8 3311.8 3816.8 Provisions 2533.6 3488.7 3655.0 Net Current Assets (-) 1388.5 2588.5 2325.8 Miscellaneous Expenses not w/o+ 00.00 00.00 0.00 Total Assets 3401.0 3273.1 3684.4 Contingent Liabilities+ 0.00 0.00 0.00 PROFIT & LOSS ACCOUNT OF |NESTLÉ LTD.} As Per Year ended 31st Dec. 2003, 2004 & 2005 (In Millions.) Particulars 2003 2004 2005 INCOMES: Sales Turnover 22798.2 23728.2 26438.9 Other Income 278.3 144.5 263.8 Stock Adjustments (-)78.7 65.5 140.9 Total 22997.8 23938.2 26843.6 EXPENDITURES: Raw Material 7386.9 8447.0 9102.2 Excise Duty 1392.6 1437.5 1688.8 Power & Fuel Cost 766.9 850.7 1039.1 Other Manufacturing Expenses+ 2734.2 2637.3 2962.9 Employee Cost 1541.5 1600.1 1789.3 Selling & Administration Expenses 4185.7 4057.1 4564.0 Miscellaneous Expenses 516.5 544.4 436.2 Less: Preoperative Expenditure Capitalised Profit before Int. Dep. & Tax 4473.5 4364.1 5261.1
  49. 49. Depreciation 462.7 491.4 568.4 Profit before Tax 3991.5 3864.9 4690.6 Tax 1360.7 1345.7 1594.9 Profit after Tax 2630.8 2519.2 3095.7 Adjustment below Net Profit + P&L Balance B/F 250.0 442.3 34.5 Appropriations 2438.5 2927.0 3058.0 P&L Balance C/F 442.3 34.5 72.2 Equity Dividend 1928.3 2362.2 2410.4 Preference Dividend 0.00 0.00 0.00 Equity Dividend (%) 200 245 250 Earning Per Share(Rs.) 24.72 22.88 28.60 Book Value 34.74 33.13 36.73 BALANCE SHEET OF |CADBURY LTD.´ As Per Year ended 31st Dec. 2003, 2004 & 2005 (in Millions Rs.) Particulars: 2003 2004 2005 SOURES OF FUNDS: Capital 357.1 357.1 357.1 Reserves & surplus 3222.2 3602.8 3981.0 LOAN FUNDS Secured 74.6 10.8 37.1 Unsecured 48.8 62.7 45.1 TOTAL 3702.7 4033.4 4420.3 APPLICATION OF FUNDS: FIXED ASSETS Gross Block 3287.4 3497.0 3955.0
  50. 50. Less: Depreciation 1750.1 2037.6 2348.8 Net Block 1537.3 1459.4 1606.2 Capital W.I.P. 68.5 214.0 295.5 INVESTMENT 1273.4 2323.0 2582.1 CURRENT ASSETS: Inventories 947.6 982.8 1023.3 Sundry Debtors 241.3 245.8 106.8 Cash & bank Balance 348.9 101.32 184.0 Loans & advances 638.1 433.7 533.9 2067.2 2519.8 2621.2 Less: Current Liabilities & Provisions Current Liabilities+ 1224.6 1592.6 2050.9 Provisions 127.8 133.9 134.1 Net Current Assets 823.5 37.0 337.0 Miscellaneous Expenses not w/o+ 00.00 00.00 273.5 Total Assets 3702.7 4033.4 4420.3 Contingent Liabilities+ 571.3 588.3 665.4 PROFIT & LOSS ACCOUNT OF |CADBURY LTD.} As Per Year ended 31st Dec. 2003, 2004 & 2005 (In Millions.) Particulars 2003 2004 2005 INCOMES: Sales Turnover 8272.5 8852.8 10060.2 Other Income 189.8 183.6 178.7 Stock Adjustments 50.0 134.8 104.4
  51. 51. Total 8512.3 9171.2 10343.3 EXPENDITURES: Raw Material 1931.7 2224.9 2462.2 Excise Duty 1133.3 1212.3 1262.4 Power & Fuel Cost 168.0 161.7 196.2 Other Manufacturing Expenses+ 1133.3 1245.2 1388.5 Employee Cost 818.7 764.9 943.8 Selling & Administration Expenses 2027.6 2320.0 2583.1 Miscellaneous Expenses 254.3 243.0 338.0 Less: Preoperative Expenditure Capitalised Profit before Int. Dep. & Tax 1029.8 974.8 1152.1 Depreciation 308.9 339.5 340.7 Profit before Tax 720.9 635.3 811.4 Tax 264.4 173.2 351.9 Profit after Tax 456.5 462.1 459.5 Adjustment below Net Profit + P&L Balance B/F 874.1 1205.0 1550.7 Appropriations 125.6 116.4 116.4 P&L Balance C/F 1205.0 1550.7 1893.8 Equity Dividend 71.4 71.4 71.4 Preference Dividend 0.00 0.00 0.00 Equity Dividend (%) 200.00 200.00 200.00 Earning Per Share(Rs.) 12.53 12.66 12.59 Book Value 100.23 110.89 121.48 BIBLIOGRAPHY y WEB SITES REFERRED y y y y
  52. 52. y y y y y y y BOOKS REFFERED NAME OF THE BOOKS NAME OF THE AUTHORS o Management Accounting & Business Finance Shashi K. Gupta R.K. Sharma o Financial Management Eugene F. Brigham Michael C. Ehrhardt y Statistical Methods S.P. Gupta o Analysis of Financial Statements T.S. Grewal y Financial Management I.M. Pandey y Financial Management R.K. Sharma Shashi K. Gupta y Principles of Corporate Finance R.A. Brealey S.C. Myers