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FINANCIAL STATEMENT ANALYSIS OF COLGATE PALMOLIVE INDIA LTD FOR A PERIOD OF 5 YEARS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF MASTER OF COMMERCE (FA) POST GRADUATE COURSE OF JAIN UNIVERSITY SUBMITTED BY APOORVA KEDAR JOSHI (REG NO.17MCRFA024) UNDER THE GUIDANCE OF Assistant Professor. S...

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FINANCIAL STATEMENT ANALYSIS OF COLGATE PALMOLIVE INDIA LTD FOR A PERIOD OF 5 YEARS

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF MASTER OF COMMERCE (FA) POST GRADUATE COURSE OF JAIN UNIVERSITY SUBMITTED BY

APOORVA KEDAR JOSHI (REG NO.17MCRFA024)

UNDER THE GUIDANCE OF

Assistant Professor. SMITA KAVATEKAR DEPARTMENT OF COMMERCE – PG STUDIES SCHOOL OF COMMERCE STUDIES JAIN UNIVERSITY BENGALURU DECEMBER 2017

CERTIFICATE BY THE UNIVERSITY Certified that the dissertation titled “FINANCIAL STATEMENT ANALYSIS OF COLGATE PALMOLIVE INDIA LTD FOR A PERIOD OF 5 YEARS” is based on an original project study conducted by Ms. APOORVA KEDAR JOSHI bearing Register No. 17MCRFA024 under the guidance of Assistant Professor. SMITA KAVATEKAR. She has attended the required guidance sessions held. This project report has not formed a basis for the award of any Degree/Diploma of any University or Institution.

……………………………….

………………………………………

Dr. EASWARAN IYER

Dr. B.A. VASU

DEAN – COMMERCE AND

DIRECTOR

DIRECTOR – INDUSTRY INTERFACE

SCHOOL OF COMMERCE STUDIES

Date:

Place: Bengaluru

CENTER HEAD

CERTIFICATE BY THE GUIDE

Certified that the dissertation titled “FINANCIAL STATEMENT ANALYSIS OF COLGATE PALMOLIVE INDIA LTD FOR A PERIOD OF 5 YEARS” is based on an original project study conducted by Ms. APOORVA KEDAR JOSHI bearing Register No. 17MCRFA024 under my guidance. This project has not formed a basis for the award of any Degree/Diploma of any University or Institution.

…………………………………………

SIGNATURE OF THE GUIDE Assistant Professor. SMITA KAVATEKAR

Date: Place: Bengaluru

DECLARATION BY THE STUDENT

This is to certify that the project titled “FINANCIAL STATEMENT ANALYSIS OF COLGATE PALMOLIVE INDIA LTD FOR A PERIOD OF 5 YEARS” is carried out independently by me under the guidance of Assistant Professor. SMITA KAVATEKAR. This work is an original one and has not been submitted earlier to any University or any other Institution for the fulfilment of the requirement of a course study or any other credential.

…………………………… APOORVA KEDAR JOSHI Register No.17MCRFA024

DATE: Place: Bengaluru

ACKNOWLEDGEMENT I am deeply indebted to Dr. CHENRAJ ROYCHAND, President, Jain University Trust, Bengaluru, for having admitted me to undergo the M.Com (FA) Post-Graduation course during the academic year 2017-2019 in the temple of learning. It’s my privilege to thank Dr. EASWARAN IYER, Dean – Commerce and Director – Placements, Jain University, Bengaluru, for having admitted me to undergo the M.Com (FA) Post-Graduation course during the academic year 2017-2019.

I am pleased to thank Dr.B.A.VASU, Director, School of Commerce Studies, Jain University, Bengaluru, for having admitted me to undergo the M.Com (FA) Post-Graduation course during the academic year 2017-2019.

I take this opportunity to express my gratitude to Associate. Prof. Dr. SURESH, C.K Coordinator, Department of Commerce - P.G. Studies, Jain University, Bengaluru, for his valuable guidance and support for the successful completion of project work

I take this opportunity to express my profound thanks to my guide Asst. Prof. SMITA KAVATEKAR, Department of Commerce – P.G. Studies, Jain University, Bengaluru, for her valuable guidance and support for the successful completion of project work.

I am very thankful to my family and friends for their constant encouragement and support.

APOORVA KEDAR JOSHI 17MCRFA024

TABLE OF CONTENTS

Page Nos

List of tables

1

List of graphs and charts

2

Abstract or Synopsis

3

INTRODUCTION

4

Theoretical Background

5

Statement of problem

23

Review of Literature

24

The Objectives of the study

28

Definitions

29

RESEARCH DESIGN

34

Methodology

35

Source of data

35

Sampling plan

35

Data processing and analysis plan

36

Limitations of the Study

35

RESULTS: FINDINGS AND SUGGESTIONS

127

Findings and suggestions

128

CONCLUSION

131

Conclusion

132

Bibliography

133

Annexures

135

LIST OF TABLES: Page Nos. Table 2.5.1: Common Size Balance Sheet 2012 Table 2.5.2: Common Size Balance Sheet 2013 Table 2.5.3: Common Size Balance Sheet 2014 Table 2.5.4: Common Size Balance Sheet 2015 Table 2.5.5: Common Size Balance Sheet 2016 Table 2.5.6: Common Size Income Statement 2012 Table 2.5.7: Common Size Income Statement 2013 Table 2.5.8: Common Size Income Statement 2014 Table 2.5.9: Common Size Income Statement 2015 Table 2.5.10: Common Size Income Statement 2016 Table 2.5.11: Comparative Balance Sheet 2012-13 Table 2.5.12: Comparative Balance Sheet 2013-14 Table 2.5.13: Comparative Balance Sheet 2014-15 Table 2.5.14: Comparative Balance Sheet 2015-16 Table 2.5.15: Comparative Income Statement 2012-13 Table 2.5.16: Comparative Income Statement 2013-14 Table 2.5.17: Comparative Income Statement 2014-15 Table 2.5.18: Comparative Income Statement 2015-16 Table 2.5.19: Fixed Assets Amounts 2012-16 Table 2.5.20: Current Liability Amounts 2012-16 Table 2.5.21: Share Holders Amounts 2012-16 Table 2.5.22: Current Assets Amounts 2012-16 Table 2.5.23: Long Term Liability Amounts 2012-16 Table 2.5.24: Earnings Before Interest and Taxes Amounts 2012-16 Table 2.5.25: Tax Pay Out Amounts 2012-16 Table 2.5.26: Earnings After-tax Amounts 2012-16 Table 2.5.27: Earnings Available to Equity Shareholders Amounts 2012-16 Table 2.5.28: Earnings Per Share Amounts 2012-16 Table 2.5.29: Correlation of Fixed Assets and Long-Term Debt 2012-16 Table 2.5.30: Correlation of Current Assets and Liability 2012-16 Table 2.5.31: Time Series Analysis for Earnings After Tax 2012-16 Table 2.5.32: Trend Analysis for Gross Profit 2012-16 Table 2.5.33: Trend Analysis for Net Profit 2012-16 Table 2.5.34: Trend Analysis for Earnings After Tax 2012-16 Table 2.5.35: Trend Analysis for Earnings Per Share 2012-16 Table 2.5.36: Trend Analysis for Dividend Pay Out Ratio 2012-16

37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 93 95 97 99 101 103 105 107 109 111 113 115 117 119 121 123 125

1

List of Charts or Graphs:

Page Nos.

Figure 2.5.1: Fixed Assets Analysis

91

Figure 2.5.2: Current Liability Analysis

93

Figure 2.5.3: Share Holders Fund Analysis

95

Figure 2.5.4: Current Assets Analysis

97

Figure 2.5.5: Long Term Liability Analysis

99

Figure 2.5.6: Earnings Before Interest and Tax Analysis

101

Figure 2.5.7: Tax Pay Out Analysis

103

Figure 2.5.8: Earnings After Tax Analysis

105

Figure 2.5.9: Earnings Available to Equity Shareholders Analysis

107

Figure 2.5.10: Earnings Per Share Analysis

109

Figure 2.5.11: Fixed Assets and Long-Term Debt Analysis

111

Figure 2.5.12: Current Assets and Liabilities Analysis

113

Figure 2.5.13: Earnings After Tax Analysis

115

Figure 2.5.14: Gross Profit Trend Analysis

117

Figure 2.5.15: Net Profit Trend Analysis

119

Figure 2.5.16: Earnings After Tax Trend Analysis

121

Figure 2.5.17: Earnings Per Share Trend Analysis

123

Figure 2.5.18: Dividend Pay Out Ratio Trend Analysis

125

2

ABSTRACT

The FMCG system of India is featured by a large group of FMCG companies, serving many kinds of consumer and durables goods for the people. COLGATE PALMOLIVE INDIA LTD is one of the leading FMCG Company in India. COLGATE PALMOLIVE INDIA LTD is India's largest fast-moving consumer goods company with a heritage of over 80 years in India and touches the lives of two out of three Indians. This study focuses past performance and in forecasting and planning future performance. It further helps is to understand the relationship between fixed assets with long term borrowings and current assets and current assets and current liability using the Correlation method with the help of graphs. It further studies with the help of Time Series Analysis and Trend Analysis and Comparative and Common Size Statements. On overall basis company have a good future prospects and investors are likely to consider that company have good investment avenues. The overall data of COLGATE PALMOLIVE INDIA LTD is satisfactory. They haven't incurred loss from past five years.

3

CHAPTER -1 INTRODUCTION

4

CHAPTER 1 INTRODUCTION

1.1 THEORETICAL BACKGROUND OF FINANCIAL STATEMENTS ANALYSIS FINANCIAL STATEMENT A financial statement (or financial report) is a formal record of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form easy to understand. They typically include basic financial statements, accompanied by a management discussion and analysis

Financial Statement Analysis Financial statement analysis is an important means of assessing past performance to forecast and plan, future performance. Financial statement analysis focuses on the evaluation of past performance of the business firm in terms of liquidity, profitability, operational efficiency and growth potentiality. It includes the methods used in assessing and interpreting the result of past performance and current financial position as they relate to particular factors of interest in investment decisions.

MAJOR COMPONENTS

 STATEMENT OF FINANCIAL POSITION: Statement of Financial Position, also known as the Balance Sheet, presents the financial position of an entity at a given date. These are prepared quarterly and annually. The main objective of financial statement is to provide information about the financial position, performance and change in financial position of an enterprise that is useful to a wide range of users in making economic decisions. It is comprised of the following three elements: ASSETS = EQUITY + LIABILITIES Assets: Something a business owns or controls (e.g. cash, inventory, plant and machinery etc.) Liabilities: Something a business owes to someone (e.g. creditors, bank loans etc.) Equity: What the business owes to its owners. This represents the amount of capital that remains in the business after its assets are used to pay off its outstanding liabilities. Equity therefore represents the difference between the assets and liabilities. These are also called as "Source of Funds."

5

 INCOME STATEMENT: Income Statement, also known as the profit and loss statement, reports the company's financial Performance in terms of net profit or loss over a specified period. Income Statement is composed of the following two elements: Income: What the business has earned over a period (e.g. sales revenue, dividend income, etc) Expense: The cost incurred by the business over a period (e.g. salaries and wages, depreciation, rental charges, etc) Net profit or loss is arrived by deducting expenses from income.

OBJECTIVES OF FINANCIAL STATEMENT ANALYSIS The following are the important objectives of financial statements: 1. Assessment of Past Performance Past performance is a good indicator of future performance. Investors or creditors are interested in the trend of past sales, cost of goods sold, operating expenses, net income, cash flows and return on investment. These trends offer a means for judging management's past performance and are possible indicators of future performance.

2. Assessment of current position Financial statement analysis shows the current status of the firm in terms of the types of assets owned by a business firm and the different liabilities due against the enterprise.

3. Prediction of profitability and growth prospects Financial statement analysis helps in assessing and predicting the earning prospects and growth rates in earning, which are used by investors while comparing investment alternatives and other users in judging earning potential of business enterprise.

4. Prediction of bankruptcy and failure Financial statement analysis is an important tool in assessing and predicting bankruptcy and probability of business failure.

5. Assessment of the operational efficiency Financial statement analysis helps to assess the operational efficiency of the management of a company. The actual performance of the firm which are revealed in the financial statements can be compared with some standards set earlier and the deviation between standards and actual performance can be used as the indicator of efficiency of the management.

6

LIMITATIONS OF FINANCIAL STATEMENTS ANALYSIS 1. Misleads the User The accuracy of financial information largely depends on preparation of financial statements. Incorrect preparation of financial statements or window dressing results in improper information. Thus, analysis drawn from such information may mislead the user in making decisions. 2. Not useful for planning. Financial statements are prepared by using historical financial data, therefore, the information derived from such statements may not be effective in corporate planning, if the previous situation does not prevail 3. Qualitative aspects. Financial statement analysis provides only quantitative information about the company's financial affairs. However, it fails to provide qualitative information such as management labour relation, customer's satisfaction, and management’s skills and so on which are also equally important for decision making. 4. Comparative analysis is not possible The financial statements are based on historical data. Therefore, comparative analysis of financial statements of different years cannot be done as inflation distorts the view presented by the statements of different years. 5. Wrong judgement The skills used in the analysis without adequate knowledge of the subject matter may lead to negative direction. Similarly, biased attitude of the analyst may also lead to wrong judgement and conclusion.

TOOLS AND TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS:

 COMPARATIVE FINANCIAL STATEMENTS:

It is an important method of analysis, which is used to make comparison between two financial statements. Being a technique of horizontal analysis and applicable to both financial statements, income statement and balance sheet, it provides meaningful information when compared to the similar data of prior periods. The comparative statement of income statements enables to review the operational performance and to draw conclusions, whereas the balance sheets, presenting a change in the financial position during the period, show the effects of operations on the assets and liabilities. Thus, the absolute change from one period to another may be determined.

7

 COMMON SIZE STATEMENTS: The figures of financial statements are converted to percentages. It is performed by taking the total balance sheet as 100. The balance sheet items are expressed as the ratio of each asset to total assets and the ratio of each liability to total liabilities. Thus, it shows the relation of each component to the whole - Hence, the name common size.

 TREND ANALYSIS: It is an important tool of horizontal analysis. Under this analysis, ratios of different items of the financial statements for various periods are calculated and the comparison is made accordingly. The analysis over the prior year’s indicates the trend or direction. Trend analysis is a useful tool to know whether the financial health of a business entity is improving in the course of time or it is deteriorating.

 TIME SERIES ANALYSIS: It is also called as intra-firm comparison. According to this method, the relationship between different items of financial statement is established, comparisons are made, and results obtained. The basis of comparison may be: — Comparison of the financial statements of different years of the same business unit. — Comparison of financial statement of a particular year of different business units  CORRELATION : Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management. Correlation is computed into what is known as the correlation coefficient, which has value that must fall between- 1 and 1. -

A perfect positive correlation means that the correlation coefficient is exactly 1. This implies that as one security moves, either up or down, the other security moves in lockstep, in the same direction. A perfect negative correlation means that two assets move in opposite directions, while a zero correlation implies no relationship at all.

8

1.2 INDUSTRY OVERVIEW

Introduction Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian economy with Household and Personal Care accounting for 50 per cent of FMCG sales in India. Growing awareness, easier access and changing lifestyles have been the key growth drivers for the sector. FMCG goods are popularly known as consumer-packaged goods. Items in this category include all consumables (other than groceries/pulses) people buy at regular intervals. The most frequently listed items are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff, and household accessories and extends to certain electronic goods. These items are meant for daily of frequent consumption and have a high return. These retail products have short-lived shelf life compared to kitchen and other home appliances. Meanwhile, some common FMCG include coffee, tea, detergents, tobacco and cigarettes, soaps and others. The big names in this sector include Sara Lee, Nestle, Reckitt Benckiser, Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi, Mars and others; In recent years, the fast-moving consumer goods sector (FMCG) is witnessing increased use of sales promotion activities all over the world. Another key factor today is speed. Today consumer wants packaged goods that work better, faster, and smarter. The "need for speed" trend highlights the importance of speed as a potentially decisive purchase factor for packaged goods products in a world where distinctions between products are shrinking. Characteristics The following are the main characteristics of FMCGs: From customer’s perspective 



Frequent purchase Low involvement (little or no effort to choose the



item)



Short shelf life



From the seller’s perspective 



High volumes



Extensive distribution networks



Low contribution margins

High stock turnover

Low price

Rapid consumption

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Investments/ Developments The government has allowed 100 per cent Foreign Direc...