Analysis of FMCG Industries

We have taken following 3 FMCG Industries for our analysis:

Hindustan Unilever Ltd (HUL)

Godrej Consumer Products
Dabur India Ltd

We have derived the financial ratios of above Industries from the firms financial
statements. Objective of this project is to

Draw and analyze a comparison of financial ratios among the above FMCG
industries
Analyze the ratios between different time periods.

1) LIQUIDITY RATIOS: Liquidity ratios are financial metrics that are used to
determine a companys ability to pay off its short term obligations.
Current Ratio: Dabur has the highest Current Ratio among the three.
However for FMCG industries Current Ratio is not a very good indicator of
Liquidity as Low CR could indicate operational efficiency as Inventory and
Account Receivables are low. Compared to other industries , FMCG in
general have a shorter operating cycle hence have lower CR.
Quick Ratio: Daburs Quick ratio is below 1, which indicates that liquid
assets are slightly les than 1. As observed from the balance sheets, Dabur
has the highest % of Inventory i.e. 50% of cash.

As observed, the liquidity for the three firms indicates an

increasing trend over the years.

2) LEVERAGE RATIO:
The debt to equity ratio and debt ratio has been decreasing for the three
industries which is a good indicator of the industries performance. Ideal
debt to equity ratio should be less than 1. For FMCG this ratio is typically
less than 1 as because they are in a mature sector, growth is typically in
single digits. Taking on additional debt is meaningless, because internal
accruals may be sufficient for any expansion.
Net working capital to current assets.