We have taken Nerolac as a good competitor to Asian paints in their peer group, but Asian paints is a huge company

and no other competitor can match it. Asian Paints creditors are more.This will help them to invest in fixed asset as raw materials are purchased on credit. Asian Paints gives very less credit. Thus the company will have the cash to invest and to expand as they have good creditors system . Thus their total debt is also less. But in Kansai Nerolac Paints number of creditors are less compared to the Asian Paints thus borrowings of debt is higher than Asian paints. It cannot enjoying the trade creditors benefits therefore their investment is also less compared to our company.s Reserves of asian paints have been increasing since2008 .Reserves have increased from 45%to 48% but Kansai Nerolac Paints reserves are not increasing.This shows that the profitability is very low and there is no low dividend pay out ratio Asian paints profitability margins are relatively higher(12%)as compared to 9% of Kansa iNerolac Paints this may be because of less our company had less debt compared to Kansai Nerolac Paints thus there efficiencies will be more interest to be paid by Kansai Nerolac Paints Net worth is increased by 165% in Asian paints but only 79%increase in Nerolac these is because of reserves are increasing Secured loans are decreasing in Asian paints has they are paying back the secured borrowing Unsecured loan is same in all five years in Asian paints but in Nerolac they are also paying to unsecured loans There is high provisions in the Asian paints than the Nerolac Fixed asset as been increased by 215% but very less in increase Nerolac 46% this is because Asian paints had good trade credit policy this them to purchase the asset this indeed helped for growth of the company Investment has also increased 209% comparatively very high Asian paints company is very efficient so there is almost 123% increase in sale in these five years but nerolac is just growing company so its sales is 75% 2011 it was 2% in the year 2008 so this is the good competitor for Asian paint Raw material cost is high in both companies this is because Indian economy is facing from high inflation in this years

All the profit margin in Asian paints is growing more than its sales growth rate whereas in nerolac only net profit margin in growing higher than sale growth rate but operating profit PBIT is all less than its sales growth rate. This is because of high cost incurred in operating activity

Finanicial ratios are best way to to analyze companies balance sheet and profit and loss a/c . balance sheet us about companies liquidity to pay the short term debt of the company and solvency of the company to meet long term debt and profit and loss tells us efficiency of the company and profit margin so Financial ratios are dividend in to two parts they are Profitability ratio( margin on sale ,return on investments and efficiency) Liquidity/solvency ratio(short term and long term ratios) Margin of sales :- these ratio measure and determine the performance of the company these is done by margin by sale . The absolute numbers will be difficult yo analyze but when analyzed in this fashion it is to quantify the performance Gross profitmargin:-this tell us how efficient company is in using the raw materials for the increase in gross profit margin .The Asian paints GPM is reduced from 18% to16% this is mainly because of raise in price of raw material because of inflation in country.but when we compare Asian paints GPM is much higher than nerolac . Operating profit margin: this tells you about efficiency of working of the management .IN Asian paints OPM is higher than that of Nerolac it is 17% but it is decreasing in these years these may be because of employees cost , has there is high is increase in capacity there will be layoff and hiring cost to increase its efficiency Net profit this tells you actually profit earned through its sales ,net profit has been reduced in 2011 from 14% to 11% this is because GPM and OPM reduced thus NP also reduced but while comparing Asian paints NP is higher than of Nerolac that is 9% Return on investment:- this tells how efficiently the assets and equity is utilized in company in order to get high returns .How much company contribute from its profit to its assets

ROA:- this ratio tells us after paying all the cash external expenses how it has contributed to total assets in both companys ROA has fallen down because of inefficiency in utilizing the assets but here Nerolac ROA is higher than that of Asian this is because NErolac utilized its asset much better than Asian paints ROE:- this tell how well shareholder capital is utilized , this is measured income generated as a %of shareholders capital .the holder are interest in this ratio this tell the return for shareholders and this effects on the value of the firm . Asians paints ROE 39% is higher than Nerolac 22%. But but has there is high ROA in Nerolac it will increase shareholder earning has it has earned more from the outsiders capital but most benefit will be enjoyed by shareholders

Efficiency:- this tell sales generated by assets and how efficient it is manage sale Inventory Turnover Ratio:- this tell how efficiently company manage the inventory to reduce to cost . Nerolacs ITOR is better than asain paints has Asian paints takes 52 in average to turnover the inventory whereas nerolacs it take 50 days Debtors Turnover Ratio This tell how company receives payments and it credit policy. Asian payments DTOR is very well than Nerolac . Asian paints receives payments by 19 days and nerolac tkes 40 days to receive its payments creditors turnover ratio:- this tell how efficient company is to take credit from its suppliers . this ll help take the benefits of trade creditors has account payable period is more than accounts receivables here Asian paints a/c receivables is less 19days whereas 83days for a/c payables this ll help company to take the benefit of extra time .they can invest in fixed assets and helps in expansion .asian paints a/c payables period is 83days is much better than than policy of Nerolac Assets Turnover Ratio:- this another form of measuring efficient use of ones asset. Nerolac is efficient to 2.2 for 1 asset but Asian paint is not that efficient as there competitor 1.6 for every one rupee of asset Solvency ratio:- it tell solvency of the company to meet its long and short term liability Current Ratio:-this tells how efficient company is to meet short term liability . Asian paints has more liability than the current assets 0.93 % but Nerolac has good current ratio of 1.5% Quick Ratio:- this ratio tell efficience meeting current liability without the inventory nerolac had more inventory so current ratio was more but quick ratio is less 0.74 and Asian paints is still having less .34%

Debt Equity Ratio:- Asian paints had .96% and nerolac had .6% .has DER is more it increase the earning per share gives leverage benefit but if DER increase it is bad for company has it should pay is back Equity mulyiplier:-measure the ability of owner to command over resource .it is 1+DER Asian paints has decreased command over asset 2.02 to 1.96%

sustainable growth rate for Asian paints ROE*b/1-ROE*b =.3924*0.539/1-.3924*0.539=26.84% =43.51% =17.86% =24.77% =21.08% IN 2011 and 2010 company should borrow debt to maintain debt equity ratio.2009,2008,2007 company can grow more or else pay back debt . proforma income statement balance sheet will change ROE,ROA,NPR than other change little because of interest and depreciation will not change so there will be little changes in ratio.