SUMMER TRAINING PROJECT REPORT

ON

“FINANCIAL ANALYSIS OF CADBURY INDIA LTD”

In the Partial Fulfillment of the requirements for the degree ofM.B.A. (2008-10)

Submitted to: MRS. AMANDEEP KAUR

Submitted By: NIKHIL JAIN MBA 3rd Semester Roll No. 8637

RAYAT INSTITUTE OF MANAGEMENTDECLARATION

I NIKHIL JAIN, a student of MBA 3rd semester from RAYAT INSTITUTE OF MANAGEMENT (RAILMAJRA) hereby declares that I have done summer project period of about six weeks at CADBURY INDIA LTD. in BADDI, Dist. SOLAN titled "FINANCIAL ANALYSIS OF CADBURY INDIA LIMITED " All the facts and findings in this report are genuine, authentic and purely in academic interest only, on Personal and Administration (P & A) department at CADBURY INDIA LTD. in BADDI, Dist. SOLAN

NIKHIL JAIN MBA 3rd Semester

RAYAT INSTITUTE OF MANAGEMENT (RAILMAJRA)

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ACKNOWLEDGEMENT

A Successful and Satisfactory completion of any is the outcome of invaluable aggregate contribution of differential personal pulls in redial direction , explicity & implicity .I ascribe my success in this venture to my Guide

Mr. Rajneesh Verma (Procurement Manager)

Mr. Binesh Dutta (Finance Executive)

Mr. Varun Ramanan (Commercial Manager)

Under whose scholarly guidance, constant encourage and untiring patience, I had the privilege to accomplish this entire work as a reflection of his thoughts ,ideas , concept and above all his modest efforts. I am grateful to all employees of Finance Department at Cadbury India Ltd. For giving me the encouragement and all necessary facilities for carrying out this Project work. Last but not least I am thankful to all those who indirectly extended their cooperation without help of them this project may not have been in the present shape.

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PREFACE

Though the Personal factor has been recognized as a distinct field in recent years, its origin can be traced back to the origin of organization itself. In order to realize its goal employees must be trained. So, the training program should be done in the organization

This is the training report of the project that was the part of my training at CADBURY INDIA LTD. Done as a compulsory part of my MBA Programme at RAYAT INSTITUTE OF MANAGEMENT. The title of the project is Studying FINANCIAL ANALYASIS.

The whole project is divided in to various parts containing introduction about the company, and brief description about the FMCG Sector. Another part contains the analysis and interpretation of the study. Findings and suggestions also given on the basis of these analysis and interpretation.

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TABLE OF CONTENTS

ChapterPARTICULAR

  Page No   Chapter 1 Introduction of FMCG Sector 7-8Chapter 2 Introduction of CADBURY INDIA LTD. 9-27  CADBURY INDIA LTD.Profile 10  Purpose and Vission 11  Values 12  Priorities 13  Cost and Efficency 14  Cadbury Brands 15-19   Registration Office 20-21  Awards 22-24

 Industry Scenario , Growth Opportunity and Competition 24-26

  SWOT Analysis 27Chapter 3 Introduction of Financial Analysis 28-31Chapter 4 Research Methodology 32-34  Meaning  Objective of the Study  Sources of data  Research InstrumentChapter 5 Comparative Balance Sheet 35-37Chapter 6 Trend Analysis 38-39

Chapter 7 Cash Flow Statement 40-44Chapter 8 Ratio Analysis 45-50Chapter 9 Calculation and Interpretation of Ratios 51-78  Liquidity ratios 52-56  Activity ratios 57-71  Profitability ratios 72-78Chapter 10 Findings 79Chapter 11 Recommendation 80

Conclusion 81Bibliography 82

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EXECUTIVE SUMMARY

As for the compulsory training required for my course (MBA) I have selected Cadbury India Ltd in Baddi for the accomplishment of my task The reputated status ,latest technology, bright future, good working environment etc. are some important factors which has forced me to select Cadbury for getting training .During my training I have associated with different area of finance and Accounts division Cadbury India ltd and learn about new technologies to bridge up gap between theory, working or practical. Mainly I have learned to prepare the Purchase orders, how to fill the C Forms, what are the basic requirements for C forms, invoice verification and about my project Financial Analysis.

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CHAPTER - 1

INTRODUCTION

ON

FMGC

INDUSTRY

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FMCG: FAST MOVING CONSUMER GOODS

The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13.1 billion.It has a strong MNC presence and is characterised by a wellestablished distribution network, intense competition between the organised and unorganised segments and low operational cost. Availability of key raw materials, cheaper labour costs and presence across the entire value chain gives India a competitive advantage.

The most common in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff, household accessories and extends to certain electronic goods. These items are meant for daily of frequent consumption and have a high return.A major portion of the monthly budget of each household is reserved for FMCG products. The volume of money circulated in the economy against FMCG products is very high, as thenumber of products the consumer use is very high.

Companies spend a large portion of their budget on maintaining distribution networks. New entrants who wish to bring their products in the national level need to invest huge sums of money on promoting brands. Manufacturing can be outsourced. A recent phenomenon in the sector was entry of multinationals and cheaper imports. Also the market is more pressurized with presence of local players in rural areas and state brands

The performance of the industry was inconsistent in terms of sales and growth for over 4 years. The investors in the sector were not gainers at par with other booming sectors. After two years of sinking performance of FMCG sector, the year 2005 has witnessed the FMCGs demand growing. Strong growth was seen across various segments in FY06. With the rise in disposable income and the economy in good health, the urban consumers continued with their shopping spree.

- Food and health beverages, branded flour, branded sugarcane, bakery products such as bread, biscuits, etc., milk and dairy products, beverages such as tea, coffee, juices, bottled water etc, snack food, chocolates, etc.

- Frequently replaced electronic products, such as audio equipments, digital cameras, Laptops, CTVs; other electronic items such as Refrigerator, washing machines, etc. coming under the category of White Goods in FMCG;

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CHAPTER - 2

INTRODUCTION

ON

CADBURY

INDIA LIMITED

COMPANY PROFILE

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HISTORY

The Cadbury family It was John Cadbury, a young Quaker, who first set things in motion when he opened a shop in Birmingham, UK in 1824. His original focus was the trade of tea and coffee, but he soon spotted a new opportunity in cocoa beverages and laid the foundations for Cadbury's move into chocolate and then confectionery.

Cadbury's was a business founded on values and a sense of social responsibility. As a Quakers the Cadbury family believed tea, coffee, cocoa beverages could serve as an alternative to alcohol, seen to be a cause of poverty and deprivation amongst the working classes.More broadly, they were active across other Quaker campaigns for 'justice, equality and social reform, putting an end to poverty and deprivation.' For example, Cadbury were involved in the early anti-slavery movement, calls for better housing and sanitation, and inner city smoke abatement.

Across UK society Quakers were excluded from universities (which were closely tied to the established church) and therefore entry into the professions.  They were also unwilling to enter the military due to their pacifist principles, so turned their energies and talents towards business and social reform.  You could say the legal profession's loss was confectionery's gain...  So starting with cocoa hand-ground with a mortar and pestle in the back room of his shop, then renting an former malthouse, John Cadbury became a manufacturer of drinking chocolate and cocoa, laying the foundation of Cadbury's business of creating brands people love. 

INTRODUCTION

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Cadbury began its operations in 1948 by importing chocolates and then re-packing them before distribution in the Indian market. After 59 years of existence, it today has five company-owned manufacturing facilities at Thane, Induri (Pune) and Malanpur (Gwalior), Bangalore and Baddi (Himachal Pradesh) and 4 sales offices (New Delhi, Mumbai, Kolkota and Chennai). The corporate office is in Mumbai.

We are currently the world’s biggest confectionery company with a number one or number two position in 20 of the 50 largest confectionery markets across the globe.  We make, market and sell unique brands which give pleasure to millions of people around the world every day.  We are recognised as a highly respected company and an employer of choice with over 50,000 staff worldwide.Currently With origins stretching back over 200 years, today our products - which include brands such as Cadbury, Halls, Trident, Dentyne and Bubbaloo - are enjoyed in almost every country around the world.  Since then we have expanded our business throughout the world by a programme of organic and acquisition led growth..With origins stretching back over 200 years, today our products - which include brands such as Cadbury, Schweppes, Halls, Trident, Dr Pepper, Snapple, Trebor, Dentyne, Bubblicious and Bassett - are enjoyed in almost every country around the world. We employ around60,000people.

Our heritage starts back in 1783 when Jacob Schweppe perfected his process for manufacturing carbonated mineral water in Geneva, Switzerland. And in 1824 John Cadbury opened in Birmingham selling cocoa and chocolate. These two great household names merged in 1969 to form Cadbury Schweppes plc. Since then we have expanded our business throughout the world by a programme of organic and acquisition led growth. Concentrating on our core brands in beverages and confectionery since the 1980s, we have strengthened our portfolio through almost fifty acquisitions, including brand icons such as Mott's, Canada Dry, Halls, Trident, Dentyne, Bubblicious, Trebor, Bassett, Dr Pepper, 7 Up and Snapple

SOME KEY POINTS We make and sell three kinds of confectionery: chocolate, gum and candy We operate in over 60 countries John Cadbury opened for business in 1824 - making us nearly 200 years young We work with around 35,000 direct and indirect suppliers Every day millions of people around he world enjoy our brands.

PURPOSE

Cadbury core purpose is "Working together to create brands people love". The core purpose captures the spirit of what we are trying to achieve as a business.We collaborate and work as teams to convert product, our purpose continues to be to work together to create brands people love. You are sure to be fans of at least some of our famous brands products into brands.

VISSION

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To align with our core purpose, Cadbury India has defined its Vision as "Life Full Of Cadbury and Cadbury Full of Life". Cadbury India will participate in many spaces of consumer life through a cache of product offerings - be it chocolates or snacks or gum.We believe that work and fun can co-exist beautifully. Therefore at Cadbury India, it's all about work hard, play harder!. We bring moments of delight to our consumers everyday and every time. Therefore, we strongly believe that the people who create these products should also have fun while doing so.

VALUES

Performance Cadbury is passionate about winning. They compete in a tough but fair way. They are ambitious, hardworking and make the most of our abilities. They are prepared to take risks and act with speed.

Quality

Cadbury put quality and safety at the heart of all of their activities - their products, their people, their partnerships and their performance.

Respect

Cadbury genuinely care for their business and their colleagues. Cadbury listen, understand and respond. they are open, friendly and welcoming. They embrace new ideas and diverse customs and cultures.

Integrity Cadbury always strive to do the right thing. Honesty, openness and being straightforward characterise the way we do business. They have clear principles and do what they say they will do.

Responsibility Cadbury take accountability for our social, economic and environmental impact. In this way Cadbury aim to make their business, their partners and their communities better for the future.

Cadburys Business Principles are there code of conduct and also take account of global and local cultural and legal standards. They confirm our commitment to the highest standards of ethics and business conduct. Core purpose and vision section: Core purpose: Our core purpose is creating brands people love. The core purpose captures the spirit of what we are trying to achieve as a business.Cadbury collaborate and work as teams to convert products into brands.

Non-formal school set up by Cadbury for children of migrant workers in Baddi

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Thanks to the efforts of the Baddi factory team over 50 children of migrant workers living in and around our Baddi factory will now have daily access to non-formal education. Cadbury has set up a non-formal school as part of our commitment to create prosperous, inclusive and healthy communities.

This is the first phase of Project SAHYOG an 18 month project which commenced in January this year in partnership with an NGO RUCHI. The project reaches out to over 400 poor & marginalized families in Sandholi village near our Baddi factory and apart from education, the other key interventions will be on village health, sanitation, education & water harvesting.

The project was recently inaugurated by Mr B R Verma, Labour Commissioner cum Chief Inspectorate of Factories & Directorate of Employment; Himachal Pradesh in the presence of Mr Sudhir Sharma, Dy Director Industries and senior officials of BBN Industries Association. The Chief Guest appreciated Cadbury's effort to make a difference in the community and encouraged the villagers to come forward and support the initiative.

In the coming months the project through a group of 12 SAHYOG CHAMPIONS (colleagues from the Baddi factory) will undergo an orientation program with the NGO RUCHI and will subsequently mobilize Baddi colleagues to volunteer their time in the community on aspects of village health, sanitation and education.

PRIORITIESWe have a clear business plan called our Vision Into Action (VIA).  This aligns the energies and efforts of our teams behind the brands, markets and projects that will make the most impact on our revenue, our margin, and our market performance. We organize across three priorities:

Growth:  Fewer, faster, bigger, better Using our size, focus and sustainable approach to create

brands which are consumer favourites. Building strong partnerships with retailers, so we grow profitably across chocolate, gum and candy.

Efficiency: Relentless focus on price, cost and efficiency Simplifying our organization to reduce

costs and increase speed and our ability to compete. Managing our use of financial and natural resources to increase profit margins and improve our environmental impact.

Capability:  Ensure world-class quality Developing world-class skills, processes and ways of

working. Motivating our people and reward winning performance.

They are underpined by our Sustainability Commitments which have been carefully selected to both improve our business and our impact on the wider.

SUSTAINABILITY COMMITMENTS

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We see corporate social responsibility and sustainability as key to our future success - helping us create a world in which we can grow and thrive.We have identified six commitments to ensure we grow in a responsible and sustainable way for the long-term.

Commitments:

Promoting responsible consumption through thoughtful marketing, product innovation and better nutritional labeling.

Ensuring ethical and sustainable sourcing including the Cadbury Cocoa Partnership to support farmers and their communities.

Prioritizing quality and safety

Cutting carbon, packaging and water use as part of our Purple Goes Green campaign.

Nurturing and rewarding colleagues, and embracing diversity.

Investing in communities - our money, our time, our capability.

As well as being the right thing to do, they also create value and competitive advantage, helping to strengthen our business, build our reputation, and motivate our people.

COST & EFFICIENCY

Relentless Focus on Cost and Efficiency

Cadbury recognize that we can be much more profitable by simplifying the way we do things across all aspects of our business. Because of the way we have organised ourselves in the past and the number of acquisitions we have made, we are a complex business.  Our total cost base is higher and our margins are currently below our peer group average.  Our goal of increasing our underlying operating margins from around 10% in 2007 to mid-teens by end of 2011, has three core elements: A major group-wide cost and efficiency programme across all aspects of our business - in sales and administration, in the supply chain, in the regions and at the group centre. We are aiming to reduce the complexity in our business and minimize duplicated activities; Improving the performance in three key underperforming emerging markets – Russia, China and Nigeria; and Focusing relentlessly on profitable growth and where necessary, rationalizing our portfolio. Examples of the ways in which we are simplifying our business to reduce costs include: Managing our chocolate, candy and gum categories and biggest brands on a global basis rather than on an individual market or region basis.

Combining local market and regional head offices, including in the UK where we are co-locating our central head office team with the BIMA management team in a single office; Combining or clustering a number of

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markets into a single commercial organization with greater scale and lower overall costs such as Canada and the USA; Outsourcing certain financing, accounting, IT and human resource processes to specialist third party operators; This will allow us to reduce costs and invest in new state of the art factories to support our growth agendas.

BRANDS

Our brands include many global, regional and local favourites. Our three largest brands are Cadbury in chocolate, Trident in gum and Halls in candy. Other important brands include: in chocolate, Crème Egg, Flake and Green & Black’s; in gum, Hollywood, Stimorol, Dentyne, Clorets and Bubbaloo; and in candy, Éclairs and the Natural Confectionery Company.

Cadbury Dairy Milk

When Cadbury Dairy Milk chocolate with its deliciously smooth texture and unique creamy taste, was first introduced in the early 1900s, it made an immediate impact quickly becoming the market leader. The success story has continued until today when it is still the top selling chocolate brand in the country. The Cadbury Mega Brand's broad family of products has an international retail value approaching US $1billion. As an international brand, Cadbury Dairy Milk carries the same distinctive image all over the world.Cadbury Dairy Milk emerged as the No. 1 most trusted brand in Mumbai for the 2005 edition of Brand Equity's Most Trusted Brands survey. During the 1st World War, Cadbury Dairy Milk supported the war effort. Over 2,000 male employees joined the armed forces and Cadbury sent books, warm clothes and chocolates to the front.

Cadbury 5starChocolate lovers for a quarter of a century have indulged their taste buds with a Cadbury 5 Star. A leading knight in the Cadbury portfolio and the second largest after Cadbury Dairy Milk with a market share of 14%, Cadbury 5 Star moves from strength to strength every year by increasing its user base. Cadbury 5 Star & Cadbury 5 Star Crunchy now aim to continue the upward trend. This different and delightfully tasty chocolate is well poised to rule the market as an extremely successful brand. Cadbury 5 Star played an adept cupid for young couples in love in the 70's. In fact, Cadbury 5 Star was a way of professing undying love for the significant other.

Cadbury Perk

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A pretty teenager; a long line, and hunger! Rings a bell? That was how Cadbury launched its new offering; Cadbury Perk in 1996. With its light chocolate and wafer construct, Cadbury Perk targeted the casual snacking space that was dominated primarily by chips & wafers. With a catchy jingle and tongue in cheek advertising, this 'anytime, anywhere' snack zoomed right into the hearts of teenagers.In 2004, with an added dose of 'Real Cadbury Dairy Milk' and an 'improved wafer', Perk became even more irresistible. The product was supported in the market with a new look and a new campaign. The advertisement spoke of the irresistible aspect of the

brand, with 'Baaki sab Bhoola de' becoming the new mantra for Cadbury Perk. Cadbury Perk advertising has been a launch pad for Bollywood stars - Preity Zinta, Raageshwari, Gayatri Joshi and Amrita Rao, were all Perk models before they made it big on cinema screens.

Cadbury Celebrations

Cadbury Celebrations was aimed at replacing traditional gifting options like Mithai and dry- fruits during festive seasons. Cadbury Celebrations is available in several assortments: An assortment of chocolates like 5 Star, Perk, Gems, Dairy Milk and Nutties and rich dry fruits enrobed in Cadbury dairy milk chocolate in 5 variants, Almond magic, raisin magic, cashew magic, nut butterscotch and caramels.The super premium Celebrations Rich Dry Fruit Collection which is a festive offering is an exotic range of chocolate covered dry fruits and nuts in various flavours and the premium dark chocolate range which is exotic dark chocolate in luscious flavours.

Cadbury Celebrations has become a popular brand on occasions such as Diwali, Rakhi, Dussera puja. It is also a major success as a corporate gifting brand. The communication is based on the emotional route and the tag line says "rishte pakne do" which fits with the brand purpose of strengthening your relationships with something sweet

The "Rishte Pakne do" jingle was penned by noted writer Gulzar.

Cadbury TemptationsEver see people hide away their chocolate since they don’t want to share it! If you have, then its likely to be a bar of Cadbury Temptations! Cadbury Temptations is a range of delicious premium chocolate in five

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flavours.Research revealed a niche segment of “ chocoholics”- those exposed to international chocolates and those who love a variety of chocolates but possibly find the price of international chocolates too high. Cadbury Temptations is a range targeted at this segment of discerning chocolate lovers. The Cadbury Temptations range is available in 5 delicious flavour variants - Roast Almond Coffee, Honey Apricot, Mint Crunch, Black Forest and Old Jamaica. With its international quality chocolate Temptations soon became a popular brand for "chocoholics".

The advertising positioned Cadbury Temptations as a chocolate range sodelicious that it was "too good to share". Cadbury Temptations advertising won an advertising effectiveness -EFFIE award in 2001.

Cadbury Dairy Milk ÉclairsEclairs was first discovered by a local confectionery firm in London, England in the 1960s. The firm then became part of Cadbury in 1971 making Cadbury Eclairs the second largest brand in the company. The experience of eating a Cadbury Dairy Milk Eclair is truly unique because of its creamy caramel exterior and rich Cadbury Dairy Milk chocolate at the center. In 2006 Cadbury Dairy Milk Eclairs launched a crunchy Eclair with a hard caramel outside and delicious Cadbury Dairy Milk chocolate inside called Cadbury Dairy Milk Eclairs Crunch.

Gems

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The saying "Good things come in small packets" has been proven right many a times and it couldn't have been truer for the pretty chocolate buttons called Gems. Who can forget the unique, brightly colored chocolate buttons with crispy shells, encased in a pack that's as colorful as the product itself? Unrivalled in all these years, Cadbury Gems has captured every consumer's fantasy for almost 4 decades. Little wonder that Cadbury Gems, the brand that came into India in 1968 is still going strong. Today, Cadbury Gems has established itself as one of the leading brands in its segment. With the single-minded purpose to delight every consumer and help them discover the fun, exciting and adventurous side of life, Cadbury Gems will continue to be the leading brand in Cadbury India's portfolio. The colourful world of Cadbury Gems does not include the colour black.

Cadbury Bourn vitaThe brand has been an enduring symbol of mental and physical health ever since it was launched in 1948. It is hardly surprising then, that Bournvita enjoys a major presence in the Malt Food market. Given its market share of 17%, Cadbury Bournvita reaches across hundreds of cities, towns and villages through 3,50,000 outlets in India.

In the new millennium, keeping pace with the evolving mindsets of the new age consumers, Cadbury Bournvita is about arming consumers with Confidence to take on physical and mental challenges that nobody else can, resulting in one of the most successful advertising campaigns which is based on 'Real Achievers who have grown up on Bournvita'. The Cadbury Bournvita Quiz Contest, which started airing on April 12th 1972, is India's longest running national school quiz contest. Starting out as a contest held in cities, and then on radio, the contest currently has been running for over 10 years on satellite television. It has over 500 episodes to its credit, and today the contest directly reaches more than 11,25,000 students, in 4000 schools across 66 cities and 7 countries - UAE, Kuwait, Qatar, Oman, Bahrain, Nepal and India.

Halls Halls accounts for more than 50% of international cough drop sales, andis the leading sugarconfectionery brand in the world with 2% of the market.Halls is also the clear leader of the medicated confectionery market with 22%.Halls is sold as a cold relief product and has licensed medicated status in markets such asthe US, the UK and Canada. In hotter and drier countries however, Halls is boughtfor mouth refreshment.Halls is marketed in 24 different countries around the world & is offered in over 26 flavours.Halls produced the largest sweet in the world in 1964. Weighing 76kilos, the sweet was put on exhibition in New York. Halls accounts for more than 50% of international cough drop sales.

Eclairs

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Eclairs are now one of Cadbury’s top brands and is sold across five continents and in more than 23 countries.Cadbury Eclairs take you on a delicious journey through a layer of pure caramel to a heart of rich Cadbury’s chocolate.  The two classic ingredients of toffee and chocolate combine together to create a truly unique experience that has made Cadbury’s Eclairs the number one Éclair in the world.

Dentyne 

Dentyne was first introduced in 1899 by Frankling V Canning (the manager of a drug store in New York) and was the the first pinkish-colored gum available in a slab format.  Dentyne’s name is a combination of “dental” and “hygiene” as it was the first gum promoted as an aid to oral hygiene.Dentyne was first advertised in 1956 and for over 40 years was positioned as the gum that “brushes your breath” clean with a refreshingly tingle of cinnamon.  During those 40 years, over 25 successful TV advertising campaigns took place, cementing Dentyne as a market leader in the USA.

Registered Office

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Cadbury India Ltd, Cadbury House19, B Desai RoadMumbai 400 026MaharashtraIndiaTel: +91 22 4007 3100

.

Regional Office

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Thane Pune

Cadbury India Ltd Cadbury India Ltd1 Pokhran Road Induri FactoryEastern Express Highway Talegaon DabhadeThane 400 606 Pune 410 507Maharashtra MaharashtraIndia India

Himachal Pradesh GwaliorCadbury India Ltd Cadbury India Ltd

Works: Hadbast No 199 Plot No 25 Village Sandholi Baddi MalanpurTehsil- Nalagarh Industrial AreaDist. Solan 173205 Village GurikhaHimachal Pradesh Tehsil GohadIndia   Gwalior - 477 116 Madhya Pradesh India

BangaloreCadbury India LtdJodi HanumanapalyaMahadevapura PostMangalore RoadNelamangala 562 123Bangalore, Karnataka, India

AWARDSPage 21

Asian Marketing Effectiveness Awards 08

Asian Marketing Effectiveness Awards 2008 for Bournvita Folk/Fusion campaign - GOLD award for the "Best Insights and Strategic Thinking" and SILVER award for the 'Most Effective Use of Advertising'.

The Asian Marketing Effectiveness Awards are the region's most prestigious awards that celebrate resourceful Asian marketing. They are designed to set the standard for effective marketing within the region, and aim to uncover the campaigns that show results through innovative spirit and combining creativity with effectiveness to build world class brands.

Cadbury India ranked 7th Great Place to Work in India No. 1 FMCG Company

Cadbury India has been ranked as the 7th Great Place to Work and the No. 1 FMCG company in India in 2008, by the Great Place to Work Institute.

This study, in its fifth year in India , has a presence in 30 countries and is the oldest, most comprehensive and respected workplace study worldwide. Over two hundred companies throughout India participated in the survey, which measured the degree of satisfaction of employees with their place of work and picked out the best working environments. This is the fourth time we have featured amongst the Great Places to Work in India . We were ranked 10th in 2003, and were among the top 25 in 2004 and 2005.

Great Place to Work 2007

'Cadbury India' has been awarded the "Bronze Award for Excellence in People Management" in the 'Great Place to Work 2007' survey conducted by Grow Talent Company Limited and Businessworld. The award recognizes Cadbury India as a national leader in the area of Human Resource Management.

Business World along with Grow Talent has been carrying out the 'Great Place to Work' survey for the past 4 years. This award is based on the ranks received in top 25 list of the Great Place to Work India studies conducted in the last four years.

ABBY Award wins for India.

The prestigious ABBY awards, held in March, recognise creative excellence in the Indian Advertising Industry. The Ulta Perk campaign won four Silver Awards in total and the Cadbury Dairy Milk Campaign, Miss Palampur, also won a Silver Award. This year Cadbury also sponsored the new 'Young ABBY' Award.

Bournvita won the Emmvie Gold for the Best Media Innovation - TV.

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Cadbury won the Emmvie Gold for the Best Media Innovation - TV, for brand Bournvita, for the entry Physical symbol of Confidence.

Cadbury Dairy Milk & Bournvita crowned as Consumer Superbrands

Cadbury Dairy Milk & Bournvita have done it again. For the second time running, Cadbury Dairy Milk & Bournvita have been declared a `Consumer Superbrand' for 2006-7 by Superbrands India.

Cadbury- Ranked among India's most respected companies

Cadbury India has been ranked 5th in the FMCG sector, in a survey on India's most respected companies by sector conducted by Business World magazine in 2007.

Cadbury wins the Effies 2006

Pappu does it again!

At the recent Effie 2006 awards organized by The Advertising Club of Mumbai, our 'Pappu Pass Ho Gaya' advertising campaign bagged two more awards - Gold in the Consumer Products category and Silver in the Integrated advertising campaign category.

Cadbury India roars at Cannes

Cadbury India received a bronze award at the Cannes Lions International Advertising Festival for partnering with a mobile phone operator in 2005 to provide exam results via SMS to school children.

Cadbury India is a Great Place to Work

The 'Great Place to Work' Institute study listed Cadbury India as a Great Place to work in 2005 for the third time in a row. Incidentally, Cadbury was in the Top 25 in 2003, 2004 and 2005 too.

Reader's Digest Award recognizes Bournvita

Bournvita won the 'Reader's Digest Trusted Brands' Gold Award for the vitamin health supplement category in Indian in 2006. The merit was based on 7000 responses from questionnaires and telephone interviews across Asia.

Suraksha Puraskar Award – 2005

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Cadbury India's Bangalore factory has received the "Suraksha Puraskar" safety award from the National Safety Council - Karnataka chapter.

National Safety Council (NSC) was set up by the Ministry of Labour, Government of India in 1966, as an autonomous body to generate, develop and sustain a voluntary movement on Environment, Health and Safety.

INDUSTRY SCENARIO

Today, we are poised in our leap towards quantum growth. We are a part of the Cadbury Schweppes Group, world's No.1 Confectionery Company. Yes, like we said we will continue to spread happiness

GROWTH OPPORTUNITY

We have a strong presence in faster growing categories and markets. Gum, 29% of our revenue, is a prime example. We also have the largest (by value) and most broadly spread emerging markets business of any confectionery group, which in 2007 accounted for approximately one-third of our confectionery revenue. From 2004 to 2007, the revenue of our emerging markets confectionery businesses grew on average by 12% p.a. on a like-for-like basis. As a total confectionery business we have a natural growth path.   In many markets we are already leaders in one or two categories and can expand into a second or third by making the most of our global capabilities.Between 2004 and 2007, our organic revenue growth averaged 6% a year, a significant increase on the previous four years, when Cadbury’s confectionery growth averaged less than 3%, and the Adams business, which we brought in 2003, barely grew. We have significantly accelerated our growth since 2004 by unlocking the potential of the Adams business and by substantially increasing our investment in innovation, marketing and sales.

Our revenue ambition of between 4% and 6% annual organic growth for the 2008-2011 is underpinned by:The strength of our brands and market positions;

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The increased investment we have made in innovation, marketing and sales; Our greater exposure to faster growing categories (such as gum) and markets (such as emerging markets); and Healthy demand for confectionery: the market has grown consistently at around 5% every year for the last four years.Our revenue ambition allows for some rationalisation of our portfolio as we redouble our efforts to grow more profitably.

COMPETITION

By participant, the market is relatively fragmented, with the five largest confectionery companies accounting for less than 40% of the market. There are a large number of companies which participate in the markets on only a regional or local basis. We compete against multinational, regional and national companies.

Our chocolate share is built on regional strengths as is the case for the other top five chocolate groups. We command strong positions in the UK, Ireland, Australia, New Zealand, South Africa and India.Our number two position in gum is built on strong market shares throughout the Americas, in parts of Europe (including France, Spain and Turkey), and in Japan, Thailand and South Africa.In candy, we have a number one position. Halls is our largest brand in candy and our position is supported by other significant regional and local brands.We have number one and number two confectionery market positions in 20 of the world’s 50 largest confectionery markets by retail sales value. These markets accounted for around three quarters of our revenue in 2007

MAJOR KEY PLAYERS

Hindustan Unilever Ltd

ITC (Indian Tabacco Company)

Nestle India

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GCMMF (Amul)

Dabur India

Asian Paints India

Britannia Industries

Procter & Gamble Hygenic and health Care

Marico Industries

SWOT Analysis of Cadbury

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Strength:

Cadbury Schweppes plc is a very profitable organization, generated revenue of more than £6,508 billion (2005).

It is a global chocolate brand built upon a reputation for fine products and services. Cadbury Schweppes plc was one of the Fortune Top 100 Companies to Work For in 2005. The company

is a respected employer that values its workforce. The organization has strong ethical values and an ethical mission statement

Weakness:

Cadbury has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter over time.

The organization has a strong presence in the United States of America, UK and India. It is often argued that they need to look for a portfolio of countries, in order to spread business risk.

Cadbury's recall over 1 million chocolate bars over salmonella fears The organization is dependant on a main competitive advantage, the retail of coffee. This could make

them slow to diversify into other sectors should the need arise. The company has no apprehensions of cannibalization of its chocolate brands.

Opportunity:

Cadbury Company is very good at taking advantage of opportunities. The company has the opportunity to expand its global operations. New markets with new products

which are limited in particular region. Cadbury has decided to focus on a few of its key brands such as Cadbury Dairy Milk, Bournvita, Eclairs

and Halls to drive growth for the company. Cadbury India is attempting to increase the declining market for chocolate with innovation, one of which

is its sweet snack, Bytes. Brand ambassador Amitabh Bachchan for advertising there new products.

Threats:

Who knows if the market for Cadbury will grow and stay in favour with customers, or whether another type of beverage or leisure activity will replace coffee in the future?

Health organization have so many barriers for new development Cadbury’s are exposed to rises in the cost of chocolate and dairy products. Entry into salted snacks was ruled out so it is important to do new innovation and marketing research.

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CHAPTER - 3

INTRODUCTION

OF

FINANCIAL ANALYSIS

FINANCIAL ANALYSIS

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INTRODUCTION

Financial Statement are prepared primarily for decision making. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statement is not an end in itself as no meaningful conclusion can be drawn from these statement alone. However , the information provider in the financial statements. Financial analysis is ‘the process of identifying the financial strength and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account.’ There are various method or techniques used in financial statement , such as comparative statement , trend analysis , common size statement , schedule of change in working capital , fund flow and cash flow statement analysis , cost-volume-profit analysis and ratio analysis.

Meaning and concept of Financial Analysis

The term ‘ financial analysis’, also known as analysis and interpretation of financial statement’, refers to the process of determining financial strengths and weaknesses of the firm by establishing strategic relationship between the items of the balance sheet , profit and loss account and other operative data. Analysis financial statement , according to Metcalf and Titard, “is a process of evaluation the relationship between component part of a financial statement to obtain a better understanding of a firm’s position and performance.”

The purpose of financial analysis is to diagnose the information contained in financial statement so as to judge the profitability and financial soundness of the firm. Just like a doctor examines his patient by recording his body temperature , blood pressure , etc. before making his conclusion regarding the illness and before giving his treatment , a financial analyst analysis the financial statement with various tools of analysis before commemting upon the financial health or weakness of an enterprises. The analysis and interpretation of financial statement is essential to breing out the mystery behind the figures in financial statement. Financial statement analysis is an attempt to determine the significance and meaning of the financial statement data so that forecast may be made of the future earning , ability to pay interst and debt maturities (both current and long-term) and profitability of a sound dividend policy.

OBJECTIVES OF FINANCIAL ANALYSIS

The primary objective of financial statement analysis is to understand and diagnose the information contained in financial statement with a view to judge the profitability and financial soundness of the firm , and to make forecast about future prospects of the firm. The purpose of analysis depend upon the person interested in such analysis and his object. However , the following purpose or objectives of financial statement analysis may be stated to bring out the significance of such analysis :

To assess the earning capacity or profitability of the firm. To assess the operational efficiency and managerial effectiveness.

To assess the short term as well as long term solvency position of the firm.

To identify the reasons for change in profitability and financial position of the firm.

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To make inter-firm comparison.

To make forecasts about future prospects of the firm.

To assess the progress of the firm over a period of time.

To help in decision making and control.

To guide or determine the dividend action.

To provide important information for granting credit.

PARTIES INTERESTED IN FINANCIAL ANALYSIS

The following parties are interested in the analysis of financial statement :

Investors or Potential investors. Management.

Creditors or Suppliers.

Bankers and Financial institutions.

Employees.

Government.

Trade associations.

Stock exchange.

Economists and researchers.

Taxation authorities.

PROCEDURE OF FINANCIAL ANALYSIS

Broadly speaking there are three steps involved in the analysis of financial statements. These are: selection , classification , and interpretation. The first step involves selection of information (data) relevant to the purpose of analysis of financial statements. The second step involved is the methodical classification of the data and the third step includes drawing of inferences and conclusions. The following procedure is adopted for the analysis and interpretation of financial statements:

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The analyst should acquaint himself with the principles and postulates of accounting. He should know the plans and policies of the management so that he may be able to find out whether these plans are properly executed or not.

The extent of analysis should be determined so that the sphere of work may be decided. If the aim is to find out the earning capacity of the enterprise then analysis of income statement will be undertaken. On the other hand , if financial position is to be studied then the balance sheet analysis will be necessary.

The financial data given in the statement should be re-organised and re-arranged. It will involve the grouping of similar data under same heads , breaking down of individual components of statements according to nature. The data is reduced to a standard form.

A relationship is established among financial statement with the help of tool and techniques of analysis such as ratio , trends , common size , fund flow etc.

The information is interpreted in a simple and understandable way. The significance and utility of financial data is explained for helping decision-taking.

The conclusions drawn from interpretation are presented to the management in the form of report.

METHODS OR DEVICES OF FINANCIAL ANALYSIS

The analysis and interpretation of financial statement is used to determine the financial position and result of operations as well. A number of method or devices are used to study the relationship between different statements an effort is made to use those devices which clearly analyse the position of the enterprise.

The following methods of analysis are generally used:

1. Comparative balance sheet2. Trend analysis

3. Common size statement

4. Fund flow analysis

5. Cash flow analysis

6. Ratio analysis

7. Cost-volume-profit analysis

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CHAPTER – 4

RESEARCH

METHODOLOGY

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RESEARCH METHODOLOGY

MEANING:-Research methodology is a careful investigation or inquiries in a systematic manner and finding solution to problem under investigation. It is used for finding and re-finding the solution for any problem which is occurred in our project.

OBJECTIVE OF THE STUDYThe main objective of this research is to study out the financial position CADBURY INDIA LTD. So as to know the success, profitability and solvency of the firms and to simplify the accounting data for this we have

studied the cash flow statement and trend analysis and the analysis of balance sheet with the help of ratio. To

assess the short term liquidity position of the firm. To assess the long term solvency position of the firm. To check the activity of the company. To assess the earning capacity or profitability of the firm. To compare the b/sheet of previous year and current year and analysis that how much percentage change

in total assets and liabilities.

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SOURCES OF DATAPrimary Data: - Personal interview from Various account officers in CADBURY INDIA LTD.

Secondary Data: - We had collected all the data through the ANNUAL REPOTS of the Company and balance sheet of the company.

The project includes secondary source of data. The data collected has been organized analyzed and interpreted so as to draw conclusion and arrive at appropriate recommendations.

LIMITATIONS OF THE STUDYAs we know that work is always incomplete in itself. Similarly the present one the validity of this report might have partly been affected because of various limitations faced during the cause of this summer training caused out at CADBURY. Financial statements are useful tools for understanding a firm’s performance and condition. However, there are certain problems and issues encountered in such analysis, which call for care judgment in such an exercise.

Financial Analysis is so wide topic however to cover all these would affect the depth and quality of the study.

Time period for summer training was just Six weeks .It was very short period for collecting the information.

As the more information is collected from the secondary sources, so it is possible that the data used may be biased.

The financial statement of comparison may not show the free financial position of business. Since there are many factors that do not part of financial statements such as market position, customer satisfaction etc.

Price level changes are not taken into account to modify the balance sheet figures.

Some items of the information are not available in the published annual reports, for the purpose of analysis.

Data available in financial reports is not sufficient and the in-depth data for the group as a whole is not available at Baddi Plant.

RESEARCH INSTRUMENT:-PROFIT & LOSS A/CBALANCE SHEET OF THE COMPANYCASH FLOW STATEMENT

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CHAPTER – 5

COMPARATIVE

BALANCE SHEET

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COMPARATIVE BALANCESHEET

The comparative balance sheet analysis is the study of the same item, group of items and computed items in two or more balance sheet of the same business enterprise on different dates. The change in periodic balance sheet items reflects the conduct of the business. The change can be observed by comparison of the balance sheet at the beginning and at the end of a period and these changes can help in forming an opinion about the process of an enterprise. The comparative balance sheet has two columns for the data of original balance sheets. A third column is used to show increases in figures. The fourth column may be added for giving percentage of increases or decreases.

Cadbury Comparative Balance sheet for year ending December 31, 2007 & 2008

Year ending 31 December

Increase / Decraese

Increase / Decraese

2008 2007 (Amount) (Percentage)ASSETS Rs. Lacs Rs. Lacs Rs Lacs Rs

Current Assets:Cash in hand and bank

balance 26959.03 952.56 26006.47 2730.166079Sundary Debtors 1967.47 1313.8 653.67 49.75414827

Stock 22280.5 15102.43 7178.07Other Cureent Assets 6981.61 6346.02 635.59

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Loans & Advance

Total Current Assets 58188.61 23714.81 34473.8 145.3682319

Fixed AssetsNet Block 25138.89 24559.46 579.43 2.359294545

Capital Wok In Progress And Advance 12386.48 2558.27 9828.21 384.1740708

Total Fixed Assets 37525.37 27117.73 10407.64 38.37946613Investment 292.4 29849.1 -29556.7 -99.02040598

Total assets 96006.38 80681.64 15324.74 18.99408589

LIABILITIES & CAPILAL

Current Liabilities

Acceptances 82.3 57.09 25.21 44.15834647

6134.1Sundary Creditors 42738.91 36604.81 16.75763376Investor Education and Protection Fund 31.65 51.28 -19.63 -38.2800312Interst Accrude not due 65.05 34.48 30.57 88.66009281Provisions 2039.6 1761.52 278.08 15.78636632

Total Current Liabilities 44957.51 38509.18 6448.33 16.74491641

Loan Funds secured 3202.07 127.97 3074.1 2402.203641Unsecured 968.26 748.39 219.87 29.37906706

Share Capital 3218.32 3320.35 -102.03 -3.072868824Reserve & Surplus 43221.99 37293.57 5928.42 15.89662776

Deferred Tax Liability 438.23 682.18 -243.95 -35.760356551048.87 42172.46 8876.41 21.04788291

Total Liabilities 96006.38 80681.64 15324.74 18.99408589

Interpretation:-

The comparative balance sheet of the company reveals that during 2008 there has been an increase in Fixed Assets of Rs. 10407.64 Lacs i.e 38.37% while Liabilities to outsider have relatively increased by Rs. 3293.97 Lacs and share capital has decreased by RS. 102.03 Lacs. This fact depicts that the policy of the company is to purchase fixed assets from the long term sources of the finance thereby not affecting the working capital.

The current assets have increased by Rs. 34473.8 Lacs i.e 145.36% and cash has increased by Rs. 26006.47 Lacs. on the other hand, there has been an increased in inventories amounting to Rs. 7178.07 Lacs. The current Liabilities have increased only Rs 6448.33 Lacs i.e 16.74%. This further confirms that

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the company has raised long-term finances even for the current assets resulting in to an improvement in the liquidity position of the company.

Reserves and Surplus have increased for Rs. 5928.42 Lacs i.e 15.89% which shows that the company will utilize reserve for the expansion of the business and the same amount of dividend are to be distributed for every years.

The overall financial position of the company is satisfactory.

CHAPTER-6

TREND

ANALYSIS

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TREND ANALYSIS

The financial analysis may be analyzed by computing trends of the series of information. This method determines the direction upwards or downward and involves the computation of the percentage relationship that each statement items bears to the same item in base year. The information for a number of years is taken up and one year, generally the first years. The figures of the base year are taken as 100 and trend ratios for other years are calculated on the basis of base year. The analyst is able to see the trend of figures, whether upward or downward.

TREND ANALYSIS (Base Year 2004 = 100)  Sale Stock Profit before tax

YearsAmount (Lacs)

Trend (%)

Amount (Lacs)

Trend (%)

Amount (Lacs)

Trend (%)

2004 76405 100 8769 100 6353 1002005 87978 115.1 10765 122.8 8115 127.72006 105825 138.5 11969 136.5 11243 1772007 129347 169.3 15102.43 172.2 14309 225.22008 158860 207.9 22280.5 254.1 20189 317.8

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Interpretation:-

The sales have continuously increased in all the years upto 2008. The percentage in 2008 is 207.9 as compared to 100 in 2004. The increase in sale is quite satisfactory.

The figures of stock have also increased from 2004 to 2008. The increase in stock is satisfactory.

Profit before tax has substantially increased. In five years period it has more than triple. The comparative increase in profit is much higher in 2008 as compare to other years.

The expansion of the firm is good and it has double its sales and stock and profit is triple in just five years time. The profit have increased more than sales which shows that there is a proper control over cost of goods sold. The overall performance of the concern is good.

CHAPTER-7

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CASH FLOW STATEMENT

ANALYSIS

CASH FLOW STATEMENT ANALYSIS

Cash flow statement is the statement which provides information about cash receipts and cash payment and its equivalents of a firm for a given period. It provides important information that compliments the profit and loss account and Balance sheet. However, to increase the utility of a cash flow statement, cash flows are dividend into operating, financing and Investing activities of the business. This statement is prepared in such a manner that the cash flows of the period are reconciled with the beginning and ending cash balances.

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As an alternate measure of a business’s profits when it is believed that accrual accounting concept do not represent economic realities. For example a company may be notionally profitable but generating little operational cash (as may be the case for a company that batters its products rather than selling for cash). In such a case, the company may be deriving additional operating cash by issuing shares, or raising additional debts finance.

Types of Cash Flow:

Cash flow statement explains cash movements under three different heads namely:

Cash flow from Operating Activities Cash flow from Investing Activities

Cash flow from Financing Activities

Sum of these three types of cash flows reflect net increasing of cash and cash equivalents.

Operating Activities:

Operating activities are principal revenue producing activities of the enterprise and other activities that are not investing and financing activities. It includes cash effects of those transactions and events that enter be understood with the help of following example:

For a textile mill, the main operation is to buy cotton and convert the same into yarn and cloth with the help of human resources and plant and machinery. Therefore the cash flow incidental to purchase of cotton and other inputs, payment of wages and salaries, sale of yarn and cloth, all are operating cash flows.

Investing Activities:

These are the acquisition and disposal of long term assets such as land, building, plant, machinery, etc. and other investments not included in cash equivalents. Cash flow from investing activities represent the extent to which expenditure has been made for resources intended to generate futher income and cash flows.

Financing Activities:

Financing activities are the activities that result in changes in the size and composition of owner’s capital (including Preference share capital in the case of the company) and borrowings of the enterprise. Cash flow from financing activities are useful in predicting the claim on future cash flows by provider of funds (both capital and borrowings) to the enterprise.

Cash Flow Statement for the year ended 31, December 2008 & 2007 

2008 Rs. Lacs 2007 Rs.Lacs 

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A. CASH FLOW FROM OPERATING ACTIVITIES    Net Profit Before Tax 20189.11 14309.23Adjustment For :    Deprecation and Amortisation 3652.19 3432.11Finance charges 520.38 203.11Provision for Doubtful Debts 25.29 -37.37Employee Benefits 301.9 -38.52Profit on Fixed Assets Sold (net) -11.88 -17Interest Income -597.45 -168.61Dividend Income -1402.1 -1515.21Unrealised Loss/(Gain) on foreign currency cash 5 -2.27Miscellaneous Expenditure - 1367.65

Profit on Sale on Current Investment -68.1 -28.232425.23 3195.66

Operating Profit before Working Capital Changes 22614.34 1504.89Adjustment For :    Trade and other Receivable -732.35 -2591.81Inventories -7178.07 -2893.96

Sundary Creditors and other Payables 6159.31 9391.61  -1751.11 3905.84

Cash generation from operations 20863.23 21410.73Direct Taxes Paid -4347.29 -2554.08

Net Cash Generation from Operating Activities (Total A) 16515.94 18856.65B. CASH FLOW FROM INVESTING ACTIVITIES    

Purchase of Fixed Assets -14072.92 -5848.89

Sale of Fixed Assets 24.96 42.36

Interest Received 507.92 165.37

Investment Purchased -41607.52 -47854.81

Margin Money with Bank -50.85 -

Investment Sold 71232.32 43375.75

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Dividend Recived 1402.1 1515.21Net cash Generation from Investing Activities (Total B) 17436.02 -8605.01C. CASH FLOW FROM FINANCING ACTIVITES    Proceeds from Borrowings and Sales tax deferral loans 219.87 201.39

Buy Back of Share Capital -9998.94 -9400

Proceeds from Borrowings 3074.1 -325.72

Interest Paid -489.81 -171.4

Dividend Paid -683.7 -691.71

Tax on Dividend -112.86 -96.38

Net Cash used in Financing Activities (Total C) -7991.34 -10483.82Net Increase/ (decrease) in cash (A+B+C) 25960.62 -232.18

Cash Opening Balance 890.14 1120.05

Cash Closing Balance 26850.76 887.87

Interpretation:-

From the above cash flow statement we can say that the cash flow from operating activities in the current year is Rs. 16515.94 and the previous year was Rs. 18856.65 which indicates that the company has to make more payments in the previous year as compared to current year. In the current year the company has controlled its expenses so that the firm can maintain its operating capability to pay the dividend, repay loans and make the investment without the external sources of financing.

Cash flow from the investing activities in the current year is Rs. 17436.02 and in the previous year was Rs. -8605.01 which shows that more of cash has been used for the sale or purchase of resources so as to generate the future income and cash flows.

Cash flow from financing activities in the current year are Rs. -7991.34 and the previous year was Rs. -10483.82 which indicates the higher amount of long term repayment to the company in the current year and the increase / decrease in buy back of share and proceeds from borrowings is higher as compared to the previous year.

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After making the adjustment in all the three activities we can see that the cash in hand in year 2008Rs.26850.76 which more than the previous year 2007 amount Rs. 887.87 which concludes that the company is making good efforts to maintain its liquidity position and they expand their operational activities, financing activities and investing activities without the shortage of cash.

CHAPTER-8

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RATIO

ANALYSIS

RATIO ANALYSIS

We have already studied that there are various method or techniques used in analyzing financial statements, such as comparative statement, trend analysis, Cash flow statement, and ratio analysis. The ratio analysis is one of the most powerful tools of financial analysis. It is the process of establishing and interpreting various ratios (quantitative relationship between figure and groups of figures). It is with the help of ratios that the financial statement can be analyzed more clearly and decision made from such analysis. The Balance Sheet and the Statement of Income are essential, but they are only the starting point for successful financial management.

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Apply Ratio Analysis to Financial Statements to analyze the success, failure, and progress of your business. Ratio Analysis enables the business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry. To do this compare your ratios with the average of businesses similar to yours and compare your own ratios for several successive years, watching especially for any unfavorable trends that may be starting. Ratio analysis may provide the all-important early warning indications that allow you to solve your business problems before your business is destroyed by them.

Meaning of Financial Ratio:

A ratio is a simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions. According to accountant’s Handbook by Wixon, Kell and Bedford, a ratio “is an expression of the quantitative relationship between two numbers”. In simple language ratio is one number expressed in term of another and can be worked out by dividing one number into the other.

Nature of Ratio Analysis:

Ratio analysis is the technique of analysis and interpretation of Financial statement. It is the process of establishing and interpreting various ratios for helping in making decisions. However, ratio analysis is not an end in itself. It is only a means of better understanding of financial strength and weaknesses of a firm. Calculation of mere ratios does not serve any purpose, unless several appropriate ratios are analyzed and interpreted. There are a number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios from the same keeping in mind the objective of analysis.

The ratios may be used as a symptom like blood pressure, the pulse rate or the body temperature and their interpretation depend upon the calibre and competence of the analyst. The following are the four steps involved in the ratio analysis:

Selection of relevant data from the financial statement depending upon the objective of the analysis. Calculation of appropriate ratios from the above data. Comparison of the calculation ratios of the same firm in the past, or the ratios developed from projected

financial statements of some other firms or the comparison with ratios of the industry to which the firm belongs.

Interpretation of the ratios.

Interpretation of Ratios:

The interpretation of ratios is an important factor. Though calculation of ratios is also important but it is only a clerical task where as interpretation needs skill, intelligence and foresightedness. The inherent limitations of the ratio analysis should be kept in mind while interpreting them. The impact of factor such as price level change, change in accounting policies, window dressing etc., should also be kept in mind when attempting to interpret ratios. A single ratio in itself does not convey much of the sense. To make ratios useful, they have to be further interpreted. For example, say, the current ratio of 3:1 does not convey any sense unless it is interpreted and

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conclusion is drawn from it regarding condition of the firm as to whether it is very strong, good, questionable or poor.

The interpretation of the ratios can be made in the following ways:

Single Absolute Ratio: Generally speaking one cannot draw any meaning conclusion when a single ratio is considered in isolation. But single ratio may be studies in relation to certain rules of thumb which are based upon well proven conventions as for example 2:1 is considered to be a good for current assets to current liabilities.

Group of Ratios: Ratios may be interpreted by calculating a group of related ratios. A single ratio supported by other related additional ratios becomes more understandable and meaningful. For example, ihe ratio of current assets to current liabilities may be supported by ratio of liquid assets to liquid liabilities to draw more dependable conclusions.

Historical Comparison: One of the easiest and most popular ways of evaluating the performance of the firm is to compare its present ratios with the past ratios called comparison overtime. When financial ratios are compared over a period of time, it gives an indication of the direction of change and reflects whether the firm’s performance and financial position has improved deterioration or remained constant over a period of time. But while interpreting ratios from comparison over time, one has to be careful about the changes, if any, in the firm’s policies and accounting procedure.

Projected Ratios: Ratios can also be calculated for future standards based upon the projected or Performa financial statements. These future ratios may be taken as standard for comparison and the ratios calculated on actual financial statement can be compared with the standard ratios to find out variances if any. Such variances help in interpreting and taking corrective action for improvement in future.

Inter-Firm Comparison: Ratio of one firm can also be compared with the ratio of some other selected firms in the same industry at the same point of time. This kind of comparison helps in evaluating relative financial position and performance of the firm. But while making use of such comparison one has to be very careful regarding the different accounting method, policies and procedures adopted by different firms.

USE AND SIGNIFICANCE OF RATIO ANALYSIS

The ratio analysis is one of the most powerful tool of financial analysis. It is used as a device to analysis and interpret the financial health of enterprise. The use of ratios is not confined to financial managers only. As discussed earlier, there are different parties interested in the ratio analysis for knowing the financial position of the firm for different purposes. The supplier of goods on credit, banks, financial institution, investors, shareholders and management all make use of ratio analysis as a tool in evaluating the financial position and

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performance of a firm for granting credit, providing loans or making investment in the firm. With the use of ratio analysis one can measure the financial condition of the firm and can point out whether the condition is strong, good, questionable or poor. The conclusion can also be drawn as to whether the performance of the firm is improving or deteriorating. Thus, ratios have wide applications and are of immense use today.

a) Managerial uses of Ratio Analysis:

Helps in decision-making: Financial statements are prepared primarily for decision-making. But the information provided in financial statements is not an end in itself and no meaningful conclusion can be drawn from these statements alone. Ratio analysis helps in making decisions from the information provided in these financial statements.

Helps in financial forecasting and planning: Ratio analysis is much help in financial forecasting and planning. Planning is looking ahead and the ratios calculated for a number of years work as a guide for the future. Meaningful conclusion can be drawn for future from these ratios.

Helps in communicating: The financial strength and weakness of the firm are communicated in a more easy and understandable manner by the use of ratios. The information contained in the financial statements is conveyed in a meaningful manner to the one for whom it is meant. Thus, ratios help in communication and enhance the value of the financial statements.

Helps in co-ordination: Ratios even help in co-ordination which is of utmost important in effective business management. Better communication of efficiency and weakness of an enterprise results in better co-ordination in the enterprise.

Helps in control: Ratio analysis even helps in making effective control of the business. Standard ratios can be based upon Performa financial statements and variances or deviations, if any, can be found by comparing the actual with the standard so as to take a corrective action at the right time. The weaknesses or otherwise, if any, come to the knowledge of the management which helps in effective control of the business.

b) Utility to Shareholders/Investors:

An investor in the company will like to assess the financial position of the concern where he is going to invest. His first interest will be the security of his investment and then a return in the form of dividend or interest. For the first purpose he will try to assess the value of fixed assets and the loans raised against them. The investor will feel satisfied only if the concern has sufficient amount of assets. Long term solvency ratios will help him in assessing financial position of the concern. Profitability ratios, on the other hand, will be useful to determine profitability position. Ratio analysis will be useful to the investor in making up his mind whether present financial position of the concern warrants further investment or not.

c) Utility to Creditors:

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The creditors or suppliers extend short term credit to the concern. They are interested to know whether financial position of the concern warrants their payments at a specified time or not. The concern pays short term creditors out of its current assets. If the current assets are quite sufficient to meet current liabilities then the creditor will not hesitate in extending credit facilities. Current and acid-test ratios will given an idea about the current financial position of the concern.

d) Utility to Employees:

The employees are also interested in the financial position of the concern especially profitability. Their wage increases and amount of fringe benefits are related to the volume of profits earned by the concern. The employees make use of information available in financial statements. Various profitability ratios relating to gross profit, operating profit, net profit, etc. enable employees to put forward their viewpoint for the increase of wages and other benefits.

e) Utility to Government:

Government is interested to know the overall strength of the industry. Various financial statements published by industrial units to calculate ratios for determining short-term, long-term and overall financial position of the concerns. Profitability indexes can also be prepared with the help of ratios. Government may base its future policies on the basis of industrial information available from various units. The ratios may be used as indicators of overall financial strength of public as well as private sectors. In the absence of the reliability economic information, government plans and policies may not prove sucessful.

f) Tax Audit Requirement:

Section 44 AB was inserted in the Income Tax Act by the Finance Act, 1984. Under this section every assesses engaged in any business and having turnover or gross receipts exceeding Rs. 40 lakh is required to get the accounts audited by a charted accountant and submit the tax audit report before the due date for filling the return of income under section 139(1). In case of a professional, a similar report is required if the gross receipts exceed Rs.10 lakh. Clause 32 of the income tax act requires that the following accounting ratios should be given:Gross Profit/TurnoverNet Profit/TurnoverStock-in-trade/TurnoverMaterial Consumed/Finished Goods Produced.

Further, it is advisable to compare the accounting ratios for the year under consideration with the accounting ratios for the earlier two years so that the auditor can make necessary enquiries, if there is any major variation in the accounting ratios.

Financial ratio are tools for interpreting financial statements to provide a basis for valuing securities and appraising financial and management performance.A good financial analyst will build in financial ratio

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calculations extensively in a financial modeling exercise to enable robust analysis. Financial ratios allow a financial analyst to:

Standardize information from financial statements across multiple financial years to allow comparison of a firm’s performance over time in a financial model.

Standardize information from financial statements from different companies to allow an apples to apples comparison between firms of differing size in a financial model.

Measure key relationships by relating inputs (costs) with outputs (benefits) and facilitates comparison of these relationships over time and across firms in a financial model.

In general, there are 4 kinds of financial ratios that a financial analyst will use most frequently, these are:

Performance ratios

What return is the company making on its capital investment? What are its profit margins?

Working capital ratios

How quickly are debts paid? How many times is inventory turned?

Liquidity ratios

Can the company continue to pay its liabilities and debts?

Solvency ratios (Longer term)

What is the level of debt in relation to other assets and to equity? Is the level of interest payable out of profits?

CHAPTER - 9

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CALCULATION

AND

INTERPRETATION

OF

RATIOS

Analysis of Short Term Financial Position or Test of Liquidity

The short term creditors of the company like suppliers of goods of credit and commercial banks providing short term loans, are primarily interested in knowing the company’s ability to meet its current and short term obligations as and when these becomes due. The short term obligations of the firm can be met only when there

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are sufficient liquid assets. Therefore, a firm must ensure that it does not suffer from lack of liquidity or the capacity to pay its obligations. If the firm fail to meet such current obligations due to lack of good liquidity position, its goodwill in the market is likely to be affected. Therefore, it is very important to have a proper balance in regard to the liquidity of the firm. Two types of ratios can be calculated for measuring short term financial position or short term solvency of the firm.

Liquidity Ratios Current Assets Movement or Efficiency Ratios.

Liquidity Ratios

Liquidity refers to the ability of the concern to meet its current obligations as and when these become due. The short term obligations are met by realizing amount from current, floating or circulating assets. The current assets should either be liquid or near liquidity. These should be convertible into cash for paying obligations of the short term nature. The sufficient or insufficient of current assets should be assessed by comparing them with short term Liabilities. If current assets can pay off current liabilities, then liquidity position will be satisfactory. Vis-versa Too measure the liquidity of the firm, the following ratios can be calculated:

1) Current Ratio 2) Quick Ratio

Current Ratios

The Current Ratio is one of the best known measures of financial strength. It is figured as shown below:

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Total Current AssetsCurrent Ratio = ____________________                      Total Current Liabilities

The main question this ratio addresses is: "Does your business have enough current assets to meet the payment schedule of its current debts with a margin of safety for possible losses in current assets, such as inventory shrinkage or collectable accounts?" A generally acceptable current ratio is 2 to 1. But whether or not a specific ratio is satisfactory depends on the nature of the business and the characteristics of its current assets and liabilities. The minimum acceptable current ratio is obviously 1:1, but that relationship is usually playing it too close for comfort.

Last Four Years Comparison of Current RatioYears 2005 2006 2007 2008Current Assets 17824.81 18367.29 23714.81 58188.61

CurrentLiability 20556.84 29341.34 38509.18 44957.51Current Ratio 0.86709874 0.62598675 0.61582225 1.29430233

Comparsion of Current Assets And Current Liabilities

Comparision of Current Ratios

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Interpretation:

Generally accepted Current Ratio is 2:1. But the ratio of Cadbury India Ltd are not satisficatory.In 2008 current assets increase but Increasing rate of current labilities are more than current assets. If company’s liquidity ratio is not satisficatory than company is enble to pay their current liabilities. In 2008 current ratio increase at higher rate because company introduce new project named Garuda.

Suggestions:

1) Company should maintain a standard; it should not be more than or less that the standard.2) If company wants to reach at satisfactory level; it should have reduce its Current liabilities in

comparison to current assets.

Quick Ratios:

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The Quick Ratio is sometimes called the "acid-test" ratio and is one of the best measures of liquidity. It is figured as shown below:

Cash + Government Securities + Receivables Quick Ratio = _________________________________________

                Total Current Liabilities

The Quick Ratio is a much more exacting measure than the Current Ratio. By excluding inventories, it concentrates on the really liquid assets, with value that is fairly certain. It helps answer the question: "If all sales revenues should disappear, could my business meet its current obligations with the readily convertible `quick' funds on hand?"An acid-test of 1:1 is considered satisfactory unless the majority of your "quick assets" are in accounts receivable, and the pattern of accounts receivable collection lags behind the schedule for paying current liabilities.

Last Four Years Comparison of Quick RatioYears 2005 2006 2007 2008Quick Assets 2907.73 2319.82 2266.36 28926.5Current Liability 20556.84 29341.34 38509.18 44957.51Quick Ratio 0.1414483 0.07906319 0.05885246 0.64341864

Comparison of Quick Assets and Current Liabilities

Comparison of Quick Ratios

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Interpretation:

Generally accepted Quick Ratio is 1:1. But the ratio of Cadbury India Ltd are not satisficatory. In 2008 Quick assets increase but Increasing rate of current labilities are more than current assets. If company’s liquidity ratio is not satisficatory than company is enble to pay their current liabilities. In 2006 Quick ratio had increase as compared to the current year 2008 .

Suggestions:

1) Company should maintain a standard, it should not be more than or less that he standard.2) If company wants to reach at satisfactory level; it should have reduce its Current liabilities in

comparison to Quick assets.

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Current Assets Movement or Efficiency / Activity Ratios or Management Ratios

Funds are invested in various assets in business to make sales and earn profits. The efficiency with which assets are managed directly affects the volume of sales. The better the management of assets, the larger is the amount of sales and the profits. Activity ratios measure the efficiency or effectiveness with which a firm manages its resources or assets. These ratios are also called turnover ratios because they indicate the speed with which assets are converted or turned over into sales. For example, inventory turnover ratio indicates the rate at which the funds invested in inventories are converted into sales. Depending upon the purpose, a number of turnover ratios can be calculated, as debtors turnover, stock turnover, working capital turnover.

The current ratio and the acid test ratio given misleading results if current assets includes high amount of debtors due to slow credit collections. In the same manner, current ratio may be further misleading if the assets include high amount of slow moving inventories. As both these ratios ignore the movement of current assets, it is important to calculate the following turnover or efficiency ratios to comment upon the liquidity or the efficiency with which the liquid rasources are being used by a firm.

There are following ratios:

1. Debtors Turnover Ratio2. Average Collection Period

3. Creditor Turnover Ratio

4. Average Payment Period

5. Working Capital Turnover Ratio

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Inventory Turnover Ratio

This ratio reveals how well inventory is being managed. It is important because the more times inventory can be turned in a given operating cycle, the greater the profit. The Inventory Turnover Ratio is calculated as follows:

                                                        Net SalesInventory Turnover Ratio = ___________________________                                          Average Inventory at Cost

Last Four Years Comparison of Inventory Turnover RatioYears 2005 2006 2007 2008Sales 87978 105825 129347 158860 Stock 10233.11 12208.47 15102.43 18370.56 Inventory Turnover Ratio(Time) 8.5973863 8.6681623 8.5646482 8.6301615

Comparison of Sales and Stock

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Comparison of Inventory Turnover Ratio

Interpretation:

In 2008, sales and inventory are increased as compared to the previous years. The inventory turnover ratio is increased which indicates an sufficient inventory management.

Suggestions:

1) Company should maintain a standard; it should not be more than or less that he standard.

2) Company should try to maintain this ratio.

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Inventory Conversion Period

It may also be interest to see average time taken for clearing the stocks. This can be possible by calculating inventory conversion period. The period is calculated by dividing the number of days by inventory turnover. The formula may be as:

                                                         Days in a year Inventory Turnover Period = ________________________                                         Inventory Turnover Period

Comparison of Days in a years and Inventory Turnover Ratio

Last Four Years Comparison of Inventory Turnover PeriodYears 2005 2006 2007 2008Days in a year 365 365 365 365Inventory Turnover Ratio(time) 8.59 8.66 8.56 8.6 Inventory Conversion Period(days) 42.4912689 42.147806 42.6401869 42.1478511

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Comparison of Inventory Turnover Period

Interpretation:

In 2008 Inventory conversion period is constant. The constant trend of holding period indicates that the company is enjoying appropriate convertibility of inventory into cash.

Suggestions:

1) Company should try to decrease the inventory conversion period.2) It is only possible when they increase the inventory Turnover ratio.

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Debtors Turnover Ratio

Debtor’s turnover ratio indicates the velocity of debts collection of the firm. In simple words, it indicates the number of times average debtors are turned over during a year, thus:

                                                Net Credit annual sales Debtors Turnover Ratio =___________________________                                          Average Trade Debtors

Opening Debtors + Closing Debtors Average Trade Debtors = ____________________________________ 2

Last Four Years Comparison of Debtor Turnover RatioYears 2005 2006 2007 2008Sales 87978 105825 129347 158860Debtors 10673 11373 13136 16534Debtors Turnover Ratio (time) 8.24304319 9.30493274 9.54675654  9.80808644 

Comparison of Sales and Debtors

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Comparison of Debtors Turnover Ratio

Interpretation: In the current year Debtors Turnover Ratio is increased as compare to the previous years. When high the Debtors turnover ratio it means collection period is low, Its good for the company.

Suggestions:

1) Company should maintain a standard ratio.2) It should try to reduce the debtors. When debtors are reduce than they deal on cash basis it means

we have sufficient cash and efficiency of the company also increased.

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Average Collection Period Ratio

The average collection period represents the average number of the days for which a firm has to wait before their receivables are converted in to cash. The ratio can be calculated as follows: No. of working days Average Collection Period = ________________________ Debtors Turnover Ratio

Last Four Years Comparison of Debtors collection periodYears 2005 2006 2007 2008Days in a year 365 365 365 365Debtor Turnover Ratio (time) 8.2 9.3 9.5  9.8 Average collection Period (days) 44.5121951 39.2473118 38.424898  37.2408333 

Comparison of Days in a year and Debtors Turnover Ratio

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Comparison of Average Collection Period

Interpretation:

In 2008 debtors turnover ratio is decreased as compared to the previous years. It s good for the company because debtors make a payment earlier.

Suggestions:

1) Company should maintain a standard ratio.2) It should maintain a better credit policy.

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Creditors Turnover Ratio

In the course of business operations, a firm has to make credit purchases & incur short-term liabilities. A supplier of goods i.e., creditor, is naturally interested in finding out how much time the firm is likely to take in repaying its trade creditors. The analysis for creditor turnover is basically the same as of debtor turnover ratio expect that in place of trade debtors, the trades creditors are taken as one of the components of the ratio & in the place of average daily sales, average daily purchases are taken as the other components of the ratio. Same as debtor turnover ratio, creditor’s turnover ratio can be calculated in two forms:

Net Credit Purchase Creditor/payable turnover ratio = Average Creditors

Last Four Years Comparison of Creditors Turnover RatioYears 2005 2006 2007 2008Purchase 106881.84 153633.31 252603.05 312589.98Creditors 18500.24 25581.58 36604.81 42738.91Creditors Turnover Ratio (time) 5.77732181 6.0056224 6.90081577 7.31394366

Comparison of Net Purchase and Creditors

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Comparison of Creditor Turnover Ratio

Interpretation:

In the current year Creditor Turnover Ratio is increased as compare to the previous years. When high the creditor turnover ratio it means payable period is low and firm cannot enjoy the credit facility.

Suggestions:

1. Firm should maintain a standard.2. The firm should purchase the material only from those vendors who provide it this facility in as

more credit as possible.

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Average Payment Period

Average Payment period ratio represents the average number of days taken by the firm to pay its creditors. Generally, lower ratio, the better is the liquidity position of the firm and higher the ratio, less liquid is the position of the firm. But a higher payment period also implies greater credit period enjoyed by the firm and consequently large the benefit reaped from credit suppliers. But one has to be careful in interpreting this ratio, as a higher ratio may also imply lesser discount facilities availed or higher price paid for the goods purchased on credit.

No. of days in a year Average Payment Period = ________________________

Creditor Turnover Ratio

Last Four Years Comparison of Average Payable PeriodYears 2005 2006 2007 2008Days in a years 365 365 365 365Creditors Turnover Ratio (time) 5.77 6 6.9 7.31Creditors Payable Period (days) 63.2582322 60.8333333 52.8985507 49.9316005

Comparison of Days and Creditor Turnover Ratio

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Comparison of Average Payable Period

Interpretation: Average payment period ratio gives the average credit period enjoyed from the creditors. It is represent the average number of days taken by the firm to pay its creditors. Lower ratio is the better for company as liquidity point of view and higher is opposite to its. But a higher payments period also implies greater credit period enjoyed by company and benefit reaped from credit suppliers. In the current year it

decreased as compare to the previous years.

Suggestions:

The firm should purchase the material only from those vendors who provide it this facility in as more credit as possible.

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Working Capital Turnover RatioWorking Capital is more a measure of cash flow than a ratio. The result of this calculation must be a positive number. It is calculated as shown below:Working Capital = Total Current Assets - Total Current LiabilitiesBankers look at Net Working Capital over time to determine a company's ability to weather financial crises. Loans are often tied to minimum working capital requirements. A general observation about these three Liquidity Ratios is that the higher they are the better, especially if you are relying to any significant extent on creditor money to finance assets. SalesWorking Capital Turnover Ratio = ____________________

Net Working capital

Last Four Years Comparison of Working Capital Turnover RatioYears 2005 2006 2007 2008Sales 87978 105825 129347 158860Working Capital(C.A - C.L) -2732.03 -10974.1 -14794.4 13231.1

Working Capital Turnover Ratio

-32.202428

-9.6431598

-8.7429703 12.0065603

Comparsion of Sales and Net Working capital

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Comparsion of Working capital ratio

Interpretation:

Before year 2008 the state of company was not solvent, as we can see that the working capital of previous years was negative. It shows that the firm was not able to deal with its day to day expenses. But now it is quite satisfactory.

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Analysis of Profitability or Profitability Ratios

The Primary objective of the business undertaking is to earn Profits. Profit earning is considered essential for the survival of the business. In the words of Lord Keynes, “Profit is the engine that drives the business enterprises”. A business needs profits not only for its existence but also foe expansion and diversification. The investors want an adequate return on their investment, workers want higher wages, creditors want higher security for their interest and loan and so on. A business enterprise can discharge its obligations to the various segments of the society only through earning of profits. Profits are, thus, a useful measure of overall efficiency of the business. Generally, profitability ratios are calculated either in relation to sales or in relation to investment. The various Profitability ratios are discussed below:

A. General Profitability Ratios.

Net Profit

Gross Profit

B. Overall Profitability Ratios.

Return on Assets

Return On Investment

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Net Profit Ratio

This ratio is the percentage of sales dollars left after subtracting the Cost of Goods sold and all expenses, except income taxes. It provides a good opportunity to compare your company's "return on sales" with the performance of other companies in your industry. It is calculated before income tax because tax rates and tax liabilities vary from company to company for a wide variety of reasons, making comparisons after taxes much more difficult. The Net Profit Margin Ratio is calculated as follows:

                                        Net Profit after Tax Net Profit Ratio = ___________________ x 100                                              Net Sales

Last Four Years Comparison of Net Profit Margin RatioYears 2005 2006 2007 2008Net Profit After tax 4596 6881 11765 16578Sales 87978 105825 129347 158860Net Profit Margin Ratio 5.22403328 6.50224427 9.09568834 10.4356037

Comparison of Net Profit and Sales

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Comparison of Net Profit Ratio

Interpretation:

In 2008 net profit ratio is increased as compared to the previous years. Its indicates the efficiency of the management, selling, administrative and other activities of the firm are satisfactory. The value of the firm will increase only if it has satisfactory level of profit. Or we can say that the expansion of the firm is depends upon its profit. It had also raised because sales are also increased and operating expenses are decreased as compare to the previous years.

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Return on Assets Ratio

This measures how efficiently profits are being generated from the assets employed in the business when compared with the ratios of firms in a similar business. A low ratio in comparison with industry averages indicates an inefficient use of business assets. The Return on Assets Ratio is calculated as follows:

                                   Net Profit before Tax Return on Assets = ________________________ x100                                     Total Assets

Last Four Years Comparison of Return on Assets RatioYears 2005 2006 2007 2008Net Profit Before tax 8115 11243 14309 20189Total Assets 44841 40462 42172 51049Return on Assets Ratio 18.097277 27.7865652 33.9300958 39.5482771

Comparison of Net Profit before Tax and Total Assets

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Comparison of Return on Assets Ratio

Interpretation:

Return on Assets turnover Ratio is increased as compare to the previous years. It is satisfactory level because it grows every year. In the current year it grows as compare to the previous years. It means the company is full utilization of the following assets and earns more and more return.

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Return on Investment (ROI) Ratio.

The ROI is perhaps the most important ratio of all. It is the percentage of return on funds invested in the business by its owners. In short, this ratio tells the owner whether or not all the effort put into the business has been worthwhile. If the ROI is less than the rate of return on an alternative, risk-free investment such as a bank savings account, the owner may be wiser to sell the company, put the money in such a savings instrument, and avoid the daily struggles of small business management. The ROI is calculated as follows:                                       Net Profit before Tax Return on Investment = ____________________                                           Net Worth

Last Four Years Comparison of Return on InvestmentYears 2005 2006 2007 2008Net Profit after tax 4596 6881 11765 16578Net Worth 46440 40614 39209 43381

Return on Investment 9.89664083 16.9424336 30.005866 38.2148867

Comparison of Net Profit after tax and Return on Investment

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Comparison of Return on Investment

Interpretation:

Return on investment ratio is increased as compare to the previous years. It is quite satisfactory level because it grows every year. It means the company is full utilization of the following assets and earns more and more return.

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CHAPTER 10

FINDING Liquidity position is not satisfied. They have more current liabilities and less current assets. In 2008 Inventory conversion period is constant. The constant trend of holding period indicates

that the company is enjoying appropriate convertibility of inventory into cash.

In 2008 debtors turnover ratio is decreased as compared to the previous years. It s good for the company because debtors make a payment earlier.

Average payment period ratio gives the average credit period enjoyed from the creditors. It is represent the average number of days taken by the firm to pay its creditors. In 2008 payment period is decrease it means that company need more cash to make the payment for the creditors.

Before year 2008 the state of company was not solvent, as we can see that the working capital of previous years was negative. It shows that the firm was not able to deal with its day to day expenses. But now it is quite satisfactory.

In 2008 net profit ratio is increased as compared to the previous years. Its indicates the efficiency of the management, selling, administrative and other activities of the firm are satisfactory.

In 2008 Solvency ratio is increased as compared to the previous years. Its indicates that the company have a sufficient amount to pay outsiders liabilities and after payment of outsider, company also have the ability to pay the shareholders amount.

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CHAPTER 11

Recommendations

Company should maintain a standard. If company wants to reach at satisfactory level; it should have to reduce its Current liabilities in comparison to current assets.

Company Should have proper records of receipts & payments.

Company Should choose such potential suppliers who can give us more credit on purchase.

Company Should try to reduced the inventory conversion period.

Company should adopt such sources which can fulfill its need of short term finance.

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CONCLUSIONFinancial analysis tells us about the financial positions of the company. As far as Cadbury India is concerned the liquidity ratio of the company is no satisfied because the ratio is 1.2 To improve the financial positions of the company the current assets should be increased. The debtors make their payments soon it helps to improve the financial position of the company. But on the other side Cadbury make their payments soon to the creditors as compare to the previous year. Inventory conversion period is constant. The constant trend of holding period indicates that the company is enjoying appropriate convertibility of inventory into cash. The profit and sales are increasing year by year so we can say that company is on its growth level.

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BIBLIOGRAPHY

Pandey I M,” Financial Management” Tata McGraw Hill Publishers, Edition 2007, 2008

Gupta Shashi K,” Management Accounting And Business Finance” Kalayani Publishers, Edition 2007, 2008

Annual Reports (year 2005, 2006, 2007, 2008)

INTERNET REFERENCES

www.cadbury india ltd.com www.fmgc sector.com www.financialmanagement.com

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