An Analysis of the Financial Statement of ITC

Submitted by-

Sachit Malik(89)
Kriti Katiyar(94)
Aman Shukla(98)
Bikram Sandhu(102)

1. GROSS PROFIT RATIO (gross profit/net sales*100)

This ratio is used to analyze how efficiently the company is using its raw
materials, labour and manufacturing-related fixed assets to generate profits. A
higher gross profit ratio means a favorable profit indicator. A manufacturing
company has a higher gross profit ratio.
ITC is earning a gross profit ratio of 59.55%, 61.37%, 61.07% , 61.86% for the
year ending march 2015 to march 2012 respectively. This shows that the
company is earning and the production efficiency is the most at 61.86% in
march 2015(year ending) in march 2015 it had a GP ratio of 59.55% which
shows that the company has an average GP ratio of 60.5% which shows that it is
not to much deviating in other words it is consistent in earning gross profit and
the investments decisions are not affected in this case.
gross profit margin

59.55%

61.37%

61.07%

61.86%

Whereas for the HUL the GP Ratio is 49.07%,47.82%,47.18%,47.09%. The

most at 49.07% the average GP is of 47.5% thus this shows that gross profit of
ITC is more.
49.07%

47.82%

47.18%

47.09%

2. NET PROFIT RATIO(net profit/net sales*100)

The net profit percentage is the ratio of after-tax profits to net sales. It reveals
the remaining profit after all costs of production, administration, and financing
have been deducted from sales, and income taxes recognized. As such, it is one
of the best measures of the overall results of a firm, especially when combined
with an evaluation of how well it is using its working capital. The measure is
commonly reported on a trend line, to judge performance over time. It is also
used to compare the results of a business with its competitors. This ratio also
shows that how much the company has spent on indirect expenses by seeing the
difference between gross profit and net profit. The highest of 26.42% in march
2015 and lowest in march 2012 with 24.48% the ratio also shows the company
has been spending a considerable amount of indirect expenses but the
investment decisions are not affected because the ratio is consistent.

Net Profit Margin(%)

26.42%

26.83%

24.81%

24.48%

The net profit ratio of HUL is 14.01%,13.80%,14.71%,12.17% The highest of

14.71% in march 2013 and lowest in march 2014 with 13.80% the ratio.Hence
the ITC net profit ratio shows that ITC spends a considerable amount.

14.01%

13.80%

14.71%

12.17%

3. Return on capital employed

ROCE = Earnings Before Interest and Tax (EBIT) / Capital Employed
ROCE is especially useful when comparing the performance of companies in
capital-intensive sectors such as utilities and telecoms. This is because unlike
return on equity (ROE), which only analyzes profitability related to a
companys common equity, ROCE considers debt and other liabilities as well.
This provides a better indication of financial performance for companies with
significant debt.
We can see that the best year to invest in this company is march 13-14 where
the roce is 33.52% and in the year march 15 it was the least year of investment.

Return On Capital Employed(%)

31.31
%

33.52% 33.36% 32.86%

For HUL we can see that the best year to invest in this company is march
12-13 where the roce is 34.55% and in the year march 12 it was the leas t year
of investment.

33.52%

31.81%

4. Return on net worth

34.55%

25.99%

This share reveals that how much profit the company is earning with the money
of equity shareholders. This ratio is not as good as Roce as it does not considers
the other liabilities.
The best point of investment was for the year ending march 2014 where return
on net worth was 33.45% and the worst case was march 2015 with 31.27%.
Return On Net Worth(%)

31.27%

33.45% 33.26% 32.75%

Whereas for HUL the ratios are 31.65%,29.75%,32.98%,24.56% the best of

investment was for the year 2013 where the net worth ratio is 32.98% and the
lowest was in the year 2012 with 24.56%
31.65%

29.75%

32.98%

24.56%

5. Current ratio(Current asset/current liability)

Current ratio is the liquidity ratio and the working capital ratio shows the
proportion of current assets of a business in relation with its current liability.
Current ratio must be analyzed over a period of time.Increase in a current ratio
over a period of time may produce a liquidity or a company or a more
conservative approach to a working capital management. Time period analysis
of the current ratio must also be taken as seasonal fluctuation.the trend shows
that the current ratios is more than 1 that is showing current asset is more than
current liability and the working capital is positive which means that company
can meet its short term liabilities.

2.38

1.85

1.78

1.66

The current ratio of HUL is 0.93,0.84,0.81,0.91 which shows that the ratio is
less than 1 so it fails to meet the short term liabilities and the current asset is
less than the current liability

0.93

0.84

0.81

0.91

6. Quick ratios
A stringent indicator that determines whether a firm has enough short-term
assets to cover its immediate liabilities without selling inventory. The acid-test
ratio is far more strenuous than the working capital ratio, primarily because the
working capital ratio allows for the inclusion of inventory assets.
For the years 14,13,12 quick ratio is more than 1 which means that the company
in the first 3 years is not depended upon inventory for paying its liability and in
all four cases its shows that smooth running of the company is there. The ratio
from march 2015 to 2012 as follows(respectively)
Quick Ratio

1.29

0.79

0.76

0.67

For all the year the quick ratio of HUL is less than 1 which means that it
depends upon inventory for paying its liabilities

0.52

0.44

0.41

0.46

7. Debtors turnover ratio(net credit sales/average debtors)

This ratio shows how efficient a company is at collecting its credit sales from
customers.
Debtors
Ratio

Turnover

18.78

27.82

26.91

25.05

From the ratio we can see that in march 2014 the company is most capable of
collecting debts as it has collected its debts around 27.82 times in a year and it
was least efficient in collecting
Debtors in march 2015 which was 18.78 times.
For HUL we can see that in m2015 the company is most capable of collecting
debts as it has collected 38.52 times and the least was in year 2012 which was
33.19

38.52

33.96

34.13

33.19

8. Interest coverage ratio(EBIT/interest)(march15-1)

Interest
Ratio

coverage 261.523
5

4597.28
1

133.76

124.15

From the above data we can see that the company can pay its interest on its
debt. In march 2014 the ratio was highest because the company was successful
in paying its debt. Overall the company is working fine with retain this ratio.
For HUL the interest coverage ratio are

328.366825

191.8349321

172.941551

2701.741935

Which shows that the highest value was in the year 2012 and the lowest was in
2013.

9. Dividend payout ratio

The dividend payout ratio measures the percentage of net income that is
distributed to shareholders in the form of dividends during the year. In other
words, this ratio shows the portion of profits the company decides to keep to
fund operations and the portion of profits that is given to its shareholders.

Dividend Payout Ratio Net Profit 0.53

0.55

.50

.44

The mean payout ratio is 2.02 and the highest is .55 the company paid a good
percentage of its dividend here which is very good for shareholders but it is
retaining less so bad for the companys growth but as the company proceeded
year after year its payout ratio decreased and retention ratio increased which
shows a growth of the company and in march 2015 the ratio was .53
For HUL the dividend payout ratio are
0.45

0.41

0.39

0.49

The highest ratio was in the year 2012 and the lowest was in the year 2013.
10. Price earning ratio(Market Value per Share / Earnings per Share
(EPS))
A valuation ratio of a company's current share price compared to its per-share
earnings.
PE ratio

27.14

31.94

29.22

22.22

From the above figures we can say that in march 2014 investors having a
mentality of longterm investments who think of future growth would invest in
this period as the PE ratio is highest at 3194.The company has done well from
march 13 but declined in performance in 2015
For HUL the ratio are

43.82

33.22

26.37

32.97

In a longterm the investmentor who think of future growth would invest in the
current period as the ratio is highest in 2015
THE DATAS ARE GIVEN IN ORDER OF MARCH 15, 14, 13,12
CONCLUSION

We infer that the ITC is growing and the company is not paying at par dividend
to shareholders rather holding it for the growth. The turnover ratios shows a
good reflection of the company and a considerable amount of share is being
done in indirect expenses which is inferred from the difference between gross
profit ratio and net profit ratio. Its competitor HUL is also performing well but
in some cases the working capital is negative. The current ratio of ITC is above
1 so it has the capability to pay short term liability whereas HUL is failing to
pay them. The ITC does not depend upon its inventory to pay the liability
whereas the HUL depends upon the inventory. The EPS of the ITC is less than
HUL so that means ITC is focusing on the growth aspect currently.