Dr. S.K. Burman set up Dabur in 1884 to produce and dispense Ayurvedic medicines reaching out to a wide mass of people who had no access to proper treatment. Dr. S.K. Burman’s commitment and ceaseless efforts resulted in the company growing from a fledgling medicine manufacturing in a small Calcutta house, to household name that at once evokes trust and reliability. There are many stores in different region and country.
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As a reflection of its constant efforts at achieving superior quality standards, Dabur became the first Ayurvedic products company to get ISO 9002 certification. Reinforcing its commitment to nature and its conservation, Dabur Nepal, a subsidiary of Dabur India, has set up fully automated greenhouses in Nepal. This scientific landmark helps to produce saplings of rare medicinal plants that are under threat of extinction due to ecological degradation. There are various product manufactured by this company in Nepal. Dabur’s Health care range brings for you a wide selection of Ayurvedic and natural products that offer complete care for varying individual needs. Our product are derived from the time-tested heritage of Ayurveda and backed by the most modern scientific test and trials that ensure no failing quality and safety in anything you pick.
The guiding force behind Dabur’s growth and success has been the wealth of nature and its limitless capacity to support life. And we have constantly taken care to preserve and protect this natural bounty with this overall vision of and to eco-sustenance, expand Dabur’s resource and production base, Dabur Nepal Private Limited was set up as an independent Group company in 1992. This new company, set amidst the verdant greens and towering mountains of the Himalayan kingdom of Nepal, has established a unique bond of technology and preservation.
Introduction to Financial Ratio: A financial ratio is a relative magnitude of two selected numerical values taken from an enterprise’s financial statements. Often used in accounting there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization. Ratio may be expressed as a decimal value, such as 0.10 or given as an equivalent percent value such as 30%. Some ratio is usually quoted as percentages. Different ratio measures different thing Liquidity ratios measure the availability of cash to pay debt. Active ratios measures how quickly a firm converts non cash assets to cash assets. Debt ratios measure the firm’s ability to repay long-term debt. Profitability ratios measure the firm’s use of its assets and control of its expenses to generate an acceptable rate of return.
Liquid Ratios: Liquidity reflects the ability of a company to meet its short-term obligations using assets that are most readily converted into cash. Assets that may be converted into cash in a short period of time are referred to as liquid assets; they are listed in financial statement as current assets. Current assets are used to satisfy short-term obligations, or current liabilities. The amount by which current assets exceed current liabilities is referred to as the net working capital.
Current Ratio: It is used to calculate that how many short term assets a company has to meet its short term obligations.
Current ratio= current assets / current liabilities
a) 1.6:1 for year 2005
b) 1.8:1 for year 2004
As we know that higher the ratio better the company has more liquid assets to meet its short term liabilities. There were sufficient amounts of assets available to meet short term liabilities in the year 2005 which was 1.6:1 so there were 1.6 current assets available to meet its short term liabilities and in the year 2004 the ratio was increased to 1.8:1 which was much better than in the year 2005. So the company had good financial status in the year 2004 than in the year 2005.
Acid Test Ratio: The acid test ratio is also known as the liquid or quick ratio. The idea behind this ratio is that stocks are sometimes a problem because they can be difficult to sell or use.
Acid Test Ratio: Current assets- closing stock/ current liabilities
0.8:1 for year 2005
1.1:1 for year 2004
As we know that higher the acid ratio, is comparatively better. So the acid test ratio in 2005 was not sufficient to meet its current liabilities but the ratio was about 1.1:1 in the year 2004 which was sufficient to meet its liabilities and hence the liquid ratio in year 2004 was much better than 2005.
Profitability Ratios: profitability ratio compares components of income with sales. They gives us an idea of what makes up a company’s income and are usually expressed as a portion of each unit of sales.
Primary Ratio
Return on Capital Employed: It is used in finance as a measure of the returns that a company is realising from its capital employed. It is commonly used as a reassure for comparing the performance between businesses and for assessing whether a business generates enough returns to pay for its cost of capital. ROCE compares earning with capital invested in the company.
ROCE= [PBIT/ Capital Employed]*100%
a)14.58% for year 2005
b) 18.79% for year 2004
This shows that ROCE in the year 2004 has more profit gained than in the year 2005.
Return on Total Assets (ROTA): A ratio that measures a company’s profit before interest and taxes (PBIT) against its total net assets. The ratio is considered an indicator of how effectively a company is using its assets to generate earning before contractual obligations must be paid.
Return on Total Assets (ROTA) = PBIT/ Total Assets
a)0.097 for year 2005
b) 0.14 for year 2004
The rate of return on total assets was better in the year 2004 in comparison with the ratio 0.097 in the year 2005 because there was more profit before interest and tax with total assets.
Secondary Ratio
Gross Profit Margin: this ratio is the percentage of sales left after subtracting the cost of goods sold from net sales. It measures the percentage of sales remaining available to pay the overhead expenses of the company.
Gross profit margin=Gross profit/ Net sales
a) 22.1% for year 2005
b) 23.9% for year 2004
It was seen form the above data that the gross profit margin in the year 2004 was better than in the year 2005 so the company had better profit margin in the year 2004.
Net Profit Margin: This ratio is the percentage of sales dollars left after subtracting the cost if 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 taxes because tax rates and tax liabilities vary from company to company for a wide variety of reasons. Net profit margin: Net profit Before Tax/ Net sales
4.7% for year 2005
6.5% for year 2004
The ratio measure average profit on sales. The percentage net profit to sales for Dabur Nepal Pvt. Ltd was 6.5% in 2004 and 4.7% in 2005 which mean that each Rs1 sales made an average profit of 6.5 Rs in 2004 and 4.7 Rs in 2005. This shows the Net Profit margin was better in the year 2004.
Assets Turnover: It is used to calculate revenue generated per amount of long term capital invested in the business. It is used to see how effectively the long term assets are being utilized to generate the revenue. It is given by
Assets Turnover= Turnover/ Capital Employed
3.87 times for 2005
3.68 times for 2004
We see the result of 3.68 times for 2004 this means that turnover is 3.68 times bigger than total assets. For the year 2005, it was even higher at 3.87 times. So the total asset turnover ratio was better in 2005 than in 2004.
Activity Ratio
Inventory Turnover: Inventory turnover is a measure of the number of times is sold or used in a time period such as a year. The equation for inventory turnover is equals the cost of goods sold divided by the average inventory, inventory turnover is also known as an inventory turns, stock turns, turns. A lower turnover ratio defines overstocking a company and a higher turnover ratio indicates inadequate inventory level or less in business. A lower turnover of inventory is somehow beneficial for a production company like Dabur Nepal Pvt. Ltd.
Inventory Turnover=cost of goods sold/ average Inventory
a)3.51 for year 2005
b) 7.65 for year 2004
Unit inventory turnover is better for the company, which excludes the over stocking and under stocking/ deficiency. It can be possible when cost of goods sold and turnover inventory are equal. As the year 2005 shows 3.51 times turnover inventories which were better because less amount of stock was there in this year but in the year 2004 the inventory turnover was more which was 7.65. As form definition we know less the turnover ratio better the profit gain by the company. So the company’s financial status was better in 2005.
Debtors Turnover: It indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors are turned over during a year.
Debtors Turnover= [Debtors/ Sales]*365
The two basic components of accounts receivable turnover ratio are net credit annual sales and average trade debtors. The trade debtors for the purpose of this ratio include the amount of Trade debtors &Bill Receivables. The average receivables are found by adding the opening receivables and closing balance of receivable and dividing the total by two.
a)20.50 days for year 2005
b) 22.17 days for year 2004
Accounts receivable turnover ratio or debtor’s turnover ratio indicates the number of times the debtors are turned over a year. The higher the value of debtors’ turnover the more efficient is the management of debtors. In the year
The debtor’s turnover was 22.17 days in the year 2004 in comparison with this there was 20.50 days in the year 2005 so, the company took less days to collect its debt in the year 2005 than in the year 2004. As a result the company had better financial state in 2005.
Conclusion
The turnover of the company has increased by 4.69% over the previous year. The net profit after tax has reduced by 2.28% over the previous year due to lower contribution margin. During the year company has invested Rs 24.65 crore on account of fixed assets. Out of which, major amount is spent towards installing a new packing machine in juice plant in flex pack and increasing cold store capacity. It has deposited off its fixed assets amounting Rs 4.51 crore during the year.
Hence as a whole Dabur Nepal Pvt. Ltd has well financial status in year 2004 but all the ratios were affected by the political instability of politic in Nepal as well as by other effect of the company.
References
http://www.dabur.com/EN/Investors1/Annual_reports/2004-05/Dabur-Nepal-fina-05.pdf
http://www.bized.co.uk/compfact/ratios/
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