Sip (Mba09008032)

Executive summary
Industrial overview
In this demanding World where industries are growing rapidly the beverage
industries are of most rapidly growing one. The beverage industries have achieved
remarkable success all over the World and its growth strategy development are at its
peak. With the coordination of effective corporate strategies the industries have
marked new heights.
Organization Profile:
Nectar Beverages Pvt Ltd is located on the outskirts of Dharwad city on
National Highway 4.It is spread on sprawling 5.25 acres and has consistently
producing world class soft drinks. This plant is established in 1984.It has started
manufacturing from 1998 the International brands –Pepsi, 7-up, Mirinda Orange,
Objectives of the study:
 To study and analyze the financial statements of Nectar Beverages Pvt. Ltd
Dharwad
 To know Company’s ability regarding how it will maintain good financial
condition.
 To ascertain level of profit generated by Nectar Beverages Pvt Ltd, Dharwad
 To suggest possible future financial liquidity position of the firm.
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MBA09008032 KES’s INSTITUTE OF EXCELLENCE IN MANAGEMENT SCIENCE
Findings
• Current ratio was increasing from FY 2006-07 till 2007-08 but it has been
reduced in the FY 2009-10. But company is maintaining good solvency
ratio that is 2.34:1 as compared to standard ratio that is 2:1 so company is
having good solvency position in the short run.
• The company’s Quick ratio is increasing year by year it shows the

company has good liquidity position.
• Net working capital ratio is increasing year by year it shows good for the
manufacturing company. It is considered as good measure of safety.
• The debt equity ratio shows that the company was reduced debt for first 3
years but in the financial year 2009-10 it has got increased it shows
company’s risk has been increased.
• The inventory turnover ratio for the last FY i.e 2000-10 is very high it
shows the company is converting inventories into sales very quickly which
is good for the company. Due to this the conversion period has been
reduced.
• Fixed assets turnover ratio is increased it means the company is utilizing

its fixed assets effectively and efficiently but current assets and total assets
turnover ratio is been reduced.
• The return on equity(ROE) was reducing for first 3 year but in the FY
2009-10 that is last year it has been increased which is good for the share
holders.
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CHAPTER I
INTRODUCTION ABOUT INDUSTRY:

Beverage industry in india
In this demanding World where industries are growing rapidly the beverage
industries are of most rapidly growing one. The beverage industries have achieved
remarkable success all over the World and its growth strategy development are at its
peak. With the coordination of effective corporate strategies the industries have
marked new heights.
The non-alcoholic beverage for the soft drink industry has been grabbing the
Indian market for the past decade. This beverage industry has won great popularity
ever since it started its operation and there has been no looking back since then.
Beverages have been described as making “the most extensive dietary impact of
foreign corporations in the developed World”. Soft drinks are predominantly
water. They help quench thirst and meet the body’s fluid requirement. They also
provide Carbohydrates as they are sweetened with sugar. Soft drink contributes such
nutrition to the diet but then still the company markets as simple refreshment.
The rumors about the soft drinks containing pesticides and its ill effects did
declined its sales but then upcoming it they are back on the track on a rise and now
they enjoy its popularity.
Soft Drinks
Soft drinks are non-alcoholic water-based flavored drinks that are optionally
sweetened, acidulated and carbonated. Some carbonated soft drinks also contain
caffeine; mainly the brown-colored cola drinks.
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The term soft drink (more commonly known as soda or pop in parts of the United
States, Canada and in the U.K. as well as coke in parts of the U.S.) originally applied
to carbonated drinks made from concentrates, although it now commonly refers to
almost any cold drink that does not contain alcohol. The name "soft drink" specifies a
lack of alcohol by way of contrast to the term "hard drink" and the term "drink", the
latter of which is nominally neutral but often carries connotations of alcoholic
content. Beverages like colas, sparkling water, lemonade, and fruit punch are among
the most common types of soft drinks, while hot chocolate, tea, coffee, milk, tap
water, alcohol, and milkshakes do not fall into this classification
Major Players-Global
The global soft drink industry is highly concentrated, being largely controlled
by the two multinational companies; Coca Cola and PepsiCo. Coca Cola leads the
carbonated soft drink market in most countries in the world with 60% of the global
cola market with its flagship Coca-Cola brand. Other notable players include Cadbury
Schweppes.
Major Players in India
The two global majors Coca-Cola and PepsiCo dominate the soft drink market
in India. Coca-Cola, which had winded up its India operations during the introduction
of the FERA regime, re-entered India 16 years later in 1993. Coca-Cola bought local
brands-Thumps Up, Limca and Gold Spot from Parle Beverages and soft drink brands
Crush, Canada Dry and Sport Cola from Cadbury Schweppes in early 1999. Pepsi
started a couple of years before Coca Cola in 1991 has bought over Mumbai based
Duke’s range of soft drink brands. There are conflicting figures about their market
share. Some estimates put the market share of PepsiCo to be higher and some put the
market share of Coca Cola to be higher. However, the soft drinks segment, dominated
by these two companies, accounted for Rs 6,247 crore in sales in 2002.
Soft drink production area
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The market preference is highly regional based. While cola drinks have main
markets in metro cities and northern states of UP, Punjab, Haryana etc. Orange
flavored drinks are popular in southern states. Sodas too are sold largely in southern
states besides sale through bars. Western markets have preference towards mango
flavored drinks. Diet coke presently constitutes just 0.7% of the total carbonated
beverage market.
Introduction about the topic:
“Study of Financial position of Nectar Beverages Pvt.Ltd Dharwad

through ratio analysis”
Financial analysis is the process of identifying the financial strengths and
weaknesses of the firm and establishing relationship between the items of the balance
sheet and profit & loss account.Financial ratio analysis is the calculation and
comparison of ratios, which are derived from the information in a company’s
financial statements. The level and historical trends of these ratios can be used to
make inferences about a company’s financial condition, its operations and
attractiveness as an investment.
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as
“The indicated quotient of two mathematical expressions” and as “The relationship
between two or more things.” In financial analysis a ratio is used as a benchmark for
evaluating the financial positions and performances of a firm. The absolute
accounting figures repeated in the financial statements do not provide a meaningful
understanding of the performance and position of a firm. An accounting figures
conveys meaning when it is related to some other relevant information. The
relationship between two or more accounting figures/ groups is called financial
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ratio.A ratio helps to summarize large quantities of financial data and to make
qualitative judgement about the firm’s financial performance.
NATURE OF RATIO ANALYSIS
Ratio analysis is a technique of analysis and interpretation of financial
statements. It is the process of establishing and interpreting various ratios for helping
in making certain decisions. It is only a means of understanding of financial strengths
and weaknesses of a firm.
Significance of ratio analysis:
As a tool of financial management, ratios are of crucial significance. The
importance of ratio analysis lies in the fact that it presents facts on a comparative
basis and enables the drawing of inferences regarding the performance of a firm.
Ratio analysis is relevant in assessing the performance of a firm in respect of the
following aspects:
I. Liquidity position
II. Long term solvency
III. Operating efficiency
IV. Overall profitability
V. Inter-firm comparison
VI. Trend analysis
Objectives of the study:
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 To study and analyze the financial statements of Nectar Beverages Pvt. Ltd
Dharwad
 To know Company’s ability regarding how it will maintain good financial
condition.
 To ascertain level of profit generated by Nectar Beverages Pvt Ltd, Dharwad
 To suggest possible future financial liquidity position of the firm.
Limitations of the study:
 The other most important limitation of the study is that the study slowly
depends on the published data and documents such as Balance sheet and Profit
and loss account.
 It was difficult to obtain confidential data from the concern department with a
view point of secrecy that the company would like to observe.
 The time limit for the study was another limitation.
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CHAPTER II
ORGANISATION PROFILE
Soft drinks market in India:
India is one of the top five markets in terms of growth of the soft drinks
market. The per capita consumption of soft drinks in the country is estimated to be
around 6 bottles per annum in the year 2003. It is very low compared to the
corresponding figures in US (600+ bottles per annum). But being one of the fastest
growing markets and by the sheer volumes, India is a promising market for soft
drinks.
The major players in the soft drinks market in India are PepsiCo and Coca-
Cola Co, like elsewhere in the world. Coca-Cola acquired a number of local brands
like Limca, Gold Spot and Thums Up when it entered Indian market for the second
time. Pepsi Co’s soft drink portfolio also consists of Miranda and 7Up along with
Pepsi. The market share of each of the company is more or less the same, though there
is a conflict in the estimates quoted by different sources.
The major ingredient in a soft drink is water. It constitutes close to 90% of the
soft drink content. Added to this, the drink also contains sweeteners, Carbon dioxide,
Citric Acid/Malic acid, Colors, Preservatives, Anti Oxidants and other emulsifying
agents, etc.
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PEPSICO IN INDIA!
PepsiCo entered India in 1989 and has grown to become one of the country’s
leading food and beverage companies. One of the largest multinational investors in
the country, PepsiCo has established a business which aims to serve the long term
dynamic needs of consumers in India.PepsiCo India and its partners have invested
more than U.S.$1 billion since the company was established in the country. PepsiCo
provides direct and indirect employment to 150,000 people including suppliers and
distributors.
PepsiCo nourishes consumers with a range of products from treats to healthy

eats that deliver joy as well as nutrition and always, good taste. PepsiCo India’s
expansive portfolio includes iconic refreshment beverages Pepsi, 7 UP, Mirinda and
Mountain Dew, in addition to low calorie options such as Diet Pepsi, hydrating and
nutritional beverages such as Aquafina drinking water, isotonic sports drinks -
Gatorade, Tropicana100% fruit juices, and juice based drinks – Tropicana Nectars,
Tropicana Twister and Slice. Local brands – Lehar Evervess Soda, Dukes Lemonade
and Mangola add to the diverse range of brands.
PepsiCo’s foods company, Frito-Lay, is the leader in the branded salty snack
market and all Frito Lay products are free of trans-fat and MSG. It manufactures
Lay’s Potato Chips; Cheetos extruded snacks, Uncle Chips and traditional snacks
under the Kurkure and Lehar brands. The company’s high fibre breakfast cereal,
Quaker Oats, and low fat and roasted snack options enhance the healthful choices
available to consumers. Frito Lay’s core products, Lay’s, Kurkure, Uncle Chipps and
Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of
its products contain voluntary nutritional labeling on their packets.
The group has built an expansive beverage and foods business. To support its
operations, PepsiCo has 43 bottling plants in India, of which 15 are company owned
and 28 are franchisee owned. In addition to this, PepsiCo’s Frito Lay foods division
has 3 state-of-the-art plants. PepsiCo’s business is based on its sustainability vision of
making tomorrow better than today. PepsiCo’s commitment to living by this vision
every day is visible in its contribution to the country, consumers and farmers.
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In everything we do, we strive for honesty, fairness and integrity
PepsiCo India is striding ahead rapidly towards enabling the global vision to
be the world's premier consumer products company focused on convenience foods
and beverages. PepsiCo India seeks to produce healthy financial rewards for investors
as it provide opportunities of growth and enrichment to its employees, business
partners and the communities in which it operates.
About Nectar Dharwad!
In 1984, Nectar Beverages used to produce the Parle products. Like the East
India Company centuries ago, the Coca Cola Company entered India in 1994 and
ordered all bottlers of Parle products to surrender their plants and businesses to them
on expiration of the contract in November 1997. The bottlers of India could not
measure up to the huge conqueror from Atlanta and therefore gave up. Some however
resisted but eventually were forced to give in. However, Fomento group had
outrightly rejected this neo-colonialism. Providence came to their rescue in the form
of a Pepsi franchise.
On November 23, 1997, Goa Bottling began producing products of Pepsi

Cola Company, Pepsi, Mirinda, Orange, Lehar Soda, Slice Mango, Mirinda Lemon,
7-Up and other products.
The Pepsi Cola Company (called Pepsi Foods Ltd. In India), although
THINKS GLOBALLY about its businesses, but it ACTS LOCALLY in its style.
It believes that local businesses, entrepreneurs, people, are best managed by

themselves. It strongly believes in furthering its businesses in India through Indians,
to be owned by Indians produced in Indian plants for the Indian people. Unlike Coca
Cola India, which is almost entirely run by American expatriates, Pepsi Company in
India (Pepsi Foods Ltd.), is 100% operated by people of Indian skin, culture and
pride. So when Goa Bottling Company produced products of Pepsi, the Coca Cola
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Co. did its utmost to kill the livelihood of the employees at Nectar Beverages by
suspending supply of concentrates and various other tactics.
Nectar Beverages was brought to a standstill. The workers moved into the
streets themselves to sell Pepsi products. It was of those rare examples in the world
where there are no differences between Management and workers and both are
partners in fighting the common enemy.
Inspite of the plant being closed, all the workers were honorably paid, even
though there was total shutdown. Over capacity through Goa plants raised a question
of whether or not to restart Nectar Beverages.
Specially because if Nectar Beverages was going to produce international

drinking like Pepsi and 7-Up, it would need even more sophisticated machineries and
quality controls. Unanimously, the management and workers of Nectar Beverages
took the battle on themselves and with belief in this mission decided that they would
never allow Nectar Beverages to close.
Nature of the Business carried:
Nectar Beverages Pvt Ltd, is the mainly Product and target oriented company.
Since it is the franchisee of the PepsiCo, it carries the business as prescribed by
PepsiCo. It is producing the same products, as its parent company i.e Pepsi Company
like Pepsi, 7-Up, Mirinda, Slice etc.
Our Mission
Our mission is to be the world's premier consumer Products Company focused

on convenient foods and beverages. We seek to produce financial rewards to investors
as we provide opportunities for growth and enrichment to our employees, our
business partners and the communities in which we operate. And in everything we do,
we strive for honesty, fairness and integrity.
Our Vision
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"PepsiCo's responsibility is to continually improve all aspects of the world in
which we operate - environment, social, economic - creating a better tomorrow than
today."
Our vision is put into action through programs and a focus on environmental
stewardship, activities to benefit society, and a commitment to build shareholder
value by making PepsiCo a truly sustainable company.
Our Quality Policy:
“Make, sell and deliver the beverage to the consumer as it was designed, in
order to derive preference.”
Safety Assured: Nectar Beverages follows one quality standard across the
globe.Nectar Beverages soft drinks meet the local Indian standards (Health Ministry
Standards for carbonated beverages notified July 15, 2004) which compare to the
best-in-class and most stringent international standards being followed anywhere in
the world.
Our products comply with the Prevention of Food Adulteration Act (PFA)
directive on the use of water in the preparation of soft drinks. We also comply with
Bureau of Indian Standards (BIS) for packaged drinking water. We use a six-stage
water purification process to deliver this standard consistently.
Nectar Beverages has a long-standing commitment to protecting the

consumers whose trust and confidence in its products is the bedrock of its success. In
order to ensure that consumers stay informed about the global quality of all Nectar
Beverages products sold in India, Nectar Beverages products carry a quality assurance
seal on them. The ‘One Quality Worldwide’ assurance seal appears on the entire
range of Nectar Beverage’s beverages.
Plant Nectar Beverages Pvt.Ltd. Dharwad:
Nectar Beverages Pvt. Ltd. belongs to the Pepsi Cola Family and firmly believes
in T.Q.P (Total Quality Performance). We have installed the best of automatic
equipment’s resulting in bacteria free products. Our Product contains useful vitamins
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and isotonic salts. The production staff are trained to international standards by the
principals Pepsi Cola. The water being the main raw material is treated several times
to bring it to its pure from (bacterial free). The said pure water is then used for filling
and washing purpose. The total process starting from purity of water to raw syrup, to
final syrup and filling etc., is done with utmost care to avoid any biological
contamination.
PRODUCTS PROFILE
1. PEPSI
2. MIRINDA (Orange)
3. MIRINDA(Lemon)
4. MOUNTAIN DEW
5. SLICE
6. 7-UP
7. AQUAFINA
8. TROPICANA TWISTER
9. NIMBOOZ
Area of Operation:
NBPL has registered office in Dharwad and they are operating in most part of
the North Karnataka Districts. They are supplying their supplies to 14 districts which
are as follows:
1) Dharwad
2) Haveri
3) Davangere
4) Belgaum
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5) Bagalkot
6) Hassan
7) Shimoga
8) Chikkamangalur
9) Bijapur
10) Chitradurga
11) Karwar
12) Koppal
13) Bellary
14) Gadag
Competitor’s information:Nectar Beverages Pvt Ltd facing the competition

mainly by Coke. It has competition for all its products by Coke.The major
fight between the Pepsi and Coca Cola products is as follows:
For Pepsi Coca Cola and Thumps Up
Slice Maaza
7-Up Sprite
Mirinda (Orange) Fanta
Mirinda (Lemon) Limca
Aquafina Kinley water
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Organization Structure
Nectar Beverages Dharwad Management!
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DEPARTMENTS
From the organization structure shown above we can observe that the
Departmentation is done on the basis of standard functions of the management.
HUMAN RESOURCE DEPARTMENT
Human Resource Management (HRM) is the function within an organization

that focuses on recruitment of, management of, and providing direction for the people
who work in the organization. Human Resource Management can also be performed
by line managers.
Human Resource Management is the organizational function that deals with

issues related to people such as compensation, hiring, performance management,
organization development, safety, wellness, benefits, employee motivation,
communication, administration, and training.
Duties and Responsibilities of HR Manager in Nectar Beverages are:
• To implement provisions such as standing orders of the company factories

act etc to meet the statutory requirement.
• To delegate the responsibility to workers, assessing the need of imparting
training to workers.
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• To ensure safe working conditions for the employees.
Recruitment Process in Nectar beverages:
The recruitment policy adopted by the organization has influence on its employees
and on the efficiency of the company. So the recruitment policy adopted by the
company should aim at right kind of potential candidates to ensure right kind
candidate have been stimulated for the job. The recruitment policy adopted by the
Nectar beverages pvt ltd is as follows:
1) The recruitment policy in the company begins with receiving the information
about the vacancy from the concerned department.
2) The plant manager and the HR Manager and other departmental heads discuss
the necessity of the job and take the decisions accordingly.
3) The HR Manager develops the job description and job specification
4) The next step is giving the advertisement for the requirement of the candidates
for required job.
Selection procedure in NBPL:
A nectar beverage has the simple selection procedure, as it is the franchisee unit.
The company follows the following procedure for selection:
1) Application banks
2) Preliminary interview
3) Tests
4) Final interview
Total Man power of Nectar Beverages Pvt Ltd:
CEO : 01
Managers : 05
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Executives : 32
Staff : 09
Permanent Workers : 52
Temporary workers (season) :90
SALES AND MARKETING DEPARTMENT
Functions of Sales Department:
1) Sales Department is having the rounding system to every retail outlets in the
local markets once in a week. In case the retailers are finished with stocks they
contact through phones then the stocks are sent to them.
2) After collecting the order from the retailers the sales department orders the
production department to prepare the required stock to be sent on the
mentioned date.
3) Details of the payment procedures, transportation procedure, delivery dates,

etc are also handled by the sales departments
4) Sales team settles down the deal with the retailers and takes the invoice
agreement and then documentation process is carried.
5) The sales dept. sends the invoice copy to the shipping department which
carries the work of transforming the mentioned goods to the vehicle from the
stock room, and inform back to the sales department with the
acknowledgement.
FINANCE DEPARTMENT
Appointment of Auditors:
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Auditor’s appointment will be done at the Head office (Delhi).At present
company’s auditor is O.P.Bagla & Co (Delhi).Yearly twice auditing is conducted i.e.
in the month of July and December.
Software used in the Finance Department:
From 2005, Company started using the Proft (+) windows based software for
maintaining the financial records. Before this year company used the Profit software
for its day to day operations.
Training in the Finance Department:
In the Finance Department, on the job training method is followed for the new
employees. Along with the on the job training, Head Office(Delhi) conducts some
lecture type of training once in three months.
PRODUCTION DEPARTMENT
Water treatment Plant:
Pure water is tasteless, colorless, and odorless. Water as it occurs in nature,

whatever the source, always contains impurities in solution or in suspension. The
determination of these impurities makes water analysis necessary and the control of
these impurities makes water conditioning essential.
SWEETENING AGENT AND SYRUP PREPERATION
Sweetening agents are those subsistence’s, which when blended with flavour,
acid etc. will provide satisfactory sweet taste in the finished beverages. They also
furnished body, which helps to carry or transits the flavour. They also give energy or
food value to the beverage.
SYRUP PREPERATION
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The preparation of the syrup is certainly one of the most important operation
in the beverage plant, both from the stand point of sanitation and control of
concentration. The object in syrup making is to prepare satisfactorily bended and
finished syrup from which uniform beverages of high quality can be produced.
Normally required quantity of sugar of high quality is added to treated water

and heated to 850 C, in a high grade stainless steel double jack vessel. Activated
carbon is added to this to remove impurities. Impurities along with activated carbon
added to the sugar are separated form the sugar solution by filtering the sugar syrup.
Filter paper and Hyflo Supercel are used as filter aid. The temperature of the clear
syrup thus obtained is brought down to 200 C and stored is called “Simple” syrup.
When the syrup is completely prepared by the addition and blending of all
flavouring ingredients it is called as “Ready”/ “Finished” / Flavored syrup. The syrup
is ready for use in production process.
Overall Nectar Beverages Pvt Ltd Mission:
 To achieve every batch incoming raw materials are checked for quality by
quality assurance departments.
 Using high grade sugar.
 The online and final product checks are carried out at regular intervals.
 To purchase raw materials only from approved sources, approved by
independent laboratories of international repute.
 Using equipments of superior grade stainless steel material.
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CHAPTER III
METHODOLOGY
Types of Data used in the study:

Primary data
The data is collected by the interaction and through discussion with Deputy
Finance Manager of Nectar Beverages Pvt Ltd, Dharwad.
Secondary data
Information for the study is collected from the Balance sheet and Profit and
loss accounts of the company. Company’s’ Web site is also used to collect
information.
Sample Size:
I have taken 4 years financial statements for my topic study so my sample size
is 4 years financial statements.
Tools used to analyze the data:
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I have been used the Ratios as a tool to study my project and analyze the
financial statements of the company. In ratios I took some important ratios to analyze.
Terms and concepts used in the study:
Several ratios calculated from the accounting data, can be grouped into various
classes accounting to financial activity or functions to be evaluated. We classify ratios
in to the following four important categories.
1. Liquidity ratio
2. Leverage ratio
3. Activity ratio
4. Profitability ratio
I. Liquidity ratio:
Liquidity refers to the ability of a firm to meet its obligations in the short run, usually
one year. Liquidity ratios are generally based on the relationship between current
assets (the sources for meeting short term obligations) and current liabilities.
The important liquidity ratios are:
1. Current Ratio
2. Acid Test ratio or Quick Ratio
3. Cash Ratio
4. Net Working Capital Ratio
1. Current ratio:
This ratio establishes a relationship between current assets and current liabilities. The
objectives of computing this ratio are to reflect the short-term financial strength
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/solving of a firm. In other words the objective is to measure the safety margins
available for shot-term indicators. This ratio is expressed as under.
Current Ratio = Current assets/Current liabilities
2. Quick ratio:
Quick ratio is the more severe and stringent test of a firm’s ability to meet its current
obligation. It is wise to keep liquid assets at least equal to current liabilities. This ratio
is also known as liquid ratio/acid test ratio. This ratio is usually expressed as a pure
ratio i.e. 1:1. This ratio may be expressed as under.
Quick Ratio = Quick Assets / Current Liabilities
3. Cash ratio:
Cash is the liquid assets financial analyst may examine cash ratio and its equivalent to
current liabilities. Trade investment or marketable securities are equivalent of cash it
can be calculated using by dividing cash & bank and current liabilities.
Cash ratio = Cash & bank / Current liabilities
4. Net working capital ratio:
The difference between current assets and current liabilities excluding short-term
bank borrowing is called net working capital or net current assets. NWC is sometimes
used as a measure of a firm’s liquidity. The measure of liquidity is a relationship
rather than the difference between current assets and current liabilities
Net Working Capital ratio = Net Working Capital / Net assets
II. Leverage ratio:
Financial leverage refers to the use of debt finance, while debt

capital is a cheaper source of finance. It is a riskier source. Leverage ratios help in
assessing the risk arising from the rise of debt capital.
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The important ratios are:
1. Proprietary ratio
2. Fixed assets to net worth ratio
1. Proprietary funds ratio:
Proprietary ratio is the ratio of shareholders funds to total assets. It is also called as
“net worth to total assets” ratio or “equity ratio”. It serves as a measure of long-term
solvency. It is shown as:
Proprietary funds ratio = Proprietary funds / Total assets *100
2. Fixed assets to net worth ratio:
This ratio establishes the relationship between fixed assets and shareholders fund i.e.
share capital plus reserve and surplus and retained earnings. The ratio can be
calculated as follows;
Fixed assets to net worth ratio = Fixed assets / Shareholders fund *100
III. Activity/efficiency/turnover ratio:
Activity ratios are employed to evaluate the efficiency

with which the firm manages and utilizes its assets. These ratios are also called
turnover ratios, because, they indicate the speed with which assets are being converted
or turned over into sales. Activity ratios thus involve a relationship between sales and
assets. The proper balance between sales and assets generally reflects that assets are
managed well.
Important ratios are:
1. Inventory turnover ratio

2. Inventory conversion period
3. Debtors turnover ratio
4. Average collection period
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5. Fixed assets turnover ratio
6. Total assets turnover ratio
7. Current assets turnover ratio
8. Working capital turnover ratio
9. Net assets turnover ratio
1. Inventory turnover ratio:
Inventories turnover ratio indicates the efficiency of the firm in producing and selling
its products and measures how fast the inventory is moving through the firm and
generating sales. This ratio is calculated as under
Inventory turnover ratio = Cost of goods sold /Average inventory
2. Inventory conversion period:
This ratio is used to know the conversion of the company within how many days the
inventory been converted into sale. Thus it can be computed as:
Inventory conversion period = No of days / Inventory turnover ratio
3. Debtors turnover ratio:
The debtors turnover ratio is calculated to measure the efficiency of credit promotion
policy and credit collection policy. Debtors turnover ratio indicates the speed with
which the debtors are turned over during the year. It is expressed in number of times
the average debtors are turned over during a year. Average collection period
represents the average number of days for which a firm has to wait before their
receivables are converted into cash. The ratio can be calculated as under
Debtors turnover ratio = Net sales / Debtors
4. Average collection period:
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The average collection period measures the quality of debtors since it indicates the
speed of their collection. The shorter the average collection period, the better the
quality of debtors since a short period implies the prompt payments by debtors.
Average collection period = No of days/ Debtors turnover ratio
5. Net assets turnover ratio:
The firm’s ability to produce a large volume of sales for a given amount of net assets
is the most important aspect of its operating performance. It can be calculated by
dividing the sales and net assets.
Net assets turnover ratio = Sales/Net assets
6. Fixed assets turnover ratio:
The fixed assets turnover ratio measures sales per rupee of investments in fixed assets.
The ratio is as under.
Fixed assets turnover ratio = Sales / Net fixed assets
7. Current assets turnover ratio:
This ratio is used to know the efficiency of utilization of current assets. This indicates
the efficiency with which firm uses all its assets to generate sales.
Current assets turnover ratio = Sales/ Current assets
8. Working capital turnover ratio:
This ratio is used if a firm may also like to relate net current assets (or net working
capital gap) to sales. It may thus compute net working capital turnover by dividing
sales by net working capital. The ratio is:
Working capital turnover ratio = Cost of goods sold/ Net working capital
9. Total assets turnover ratio:
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This ratio shows the firm’s ability in generating sales from all financial resources
commited to total assets. Thus:
Total Assets Turnover ratio = Sales/ Total assets
IV. Profitability ratio:
Profitability reflects the final result of business operations. Profitability ratios

are calculated to measure operating efficiency of the company.
Important profitability ratios are:
1. Return on Equity
2. Return on investment
3. Gross profit margin ratio
4. Net profit ratio
1. Return on equity:
Common or ordinary shareholders are entitled to the residual profits. The rate
of dividend is not fixed; the earnings may be distributed to shareholders or retained in
the business. Nevertheless, the net profits after taxes represent their return. A return
on shareholders’ equity or net worth will include paid-up share capital, share premium
and reserves and surplus less accumulated losses. Net worth can also be found by
substracting total liabilities from total assets.
Return on equity = Profit after tax/Shareholders equity *100
Page 27
2. Return on Investment
The Return on investments measures the overall effectiveness of

management in generating profits with its available assets.
Return On Investment = Total earnings/Total capital employed*100
3. Gross profit margin ratio:
The gross profit margin ratio reflects the efficiency with which management
produces each unit of product. This ratio indicates the average speed between the cost
of goods sold and sales revenues. The ratio is as under.
Gross profit ratio = Gross profit/ Sales*100
4. Net profit ratio:
Net profit is obtained when operating expenses interest and taxes are
substracted from the gross profit.
Net profit margin ratio establishes a relationship between net profit and sales.
It indicates management’s efficiency in manufacturing administering and selling the
products.
This ratio is the overall measures of the firm’s ability to turn each rupee sales
into net worth. This ratio also indicates the firm’s capacity to withstand adverse
economic conditions.
Net profit ratio = Net profit/ Sales
Page 28
CHAPTER IV
ANALYSIS AND INTERPRETATION
1) TABLE SHOWING CURRENT RATIO
Year Current Assets Current Liablities Current Ratio
2006-07 5,47,97,324 2,16,56,121 2.53
2007-08 8,14,33,018 4,26,32,113 1.91
2008-09 11,04,12,215 3,17,13,911 3.48
2009-10 29,52,22,173 12,61,35,221 2.34
1) GRAPH SHOWING CURRENT RATIO
Page 29
Interpretation : Table 1 shows that from year 2006-07 to 2008-09 current ratio was
increasing but in the year 2009-10 it got reduced so solvency has reduced but if we
compare with standard ratio that is 2:1 it shows company has maintained good
solvency position.
2) TABLE SHOWING QUICK RATIO
Year Quick Assets Current Liablities Quick Ratio

2006-07 3,47,24,203 3,95,88,903 0.88
2007-08 5,82,49,111 4,26,32,113 1.37
2008-09 7,70,61,659 3,17,13,911 2.43
2009-10 23,72,38,008 12,61,35,221 1.88
2) GRAPH SHOWING QUICK RATIO
Page 30
Interpretation : Table 2 shows that from year 2006-07 to year 2008-09 it has been
increasing but in the year 2009-10 it got reduced it shows companies liquidity
position in the year 2010 got reduced but it is maintaining as per standard ratio that is
1.33:1 so company has still good liquidity position.
3) TABLE SHOWING CASH RATIO
Cash & Bank

Year Current Liablities Cash Ratio
balance
2006-07 61,37,886 3,95,88,903 0.16
2007-08 76,49,615 4,26,32,113 0.18
2008-09 1,09,57,975 3,17,13,911 0.35

2009-10 2,60,29,218 12,61,35,221 0.21
Page 31
3) GRAPH SHOWING CASH RATIO
Interpretation : Table 3 Shows that Like both Current and Quick ratios the Cash
ratios also increased from FY 2006-07 to 2008-09 but in the FY 2009-10 it has
reduced it means the cash position of the company got reduced due to increase in the
current assets. So company has to maintain standard cash ratio.
4) TABLE SHOWING NETWORKING CAPITAL RATIO
Net Woking Net working

Year Captil Net assets captil ratio
2006-07 1,52,08,421 21,35,42,333 0.07
2007-08 3,88,00,905 20,08,46,406 0.19
2008-09 7,86,98,304 18,43,37,909 0.43

2009-10 16,90,86,952 29,92,21,097 0.57
Page 32
4) GRAPH SHOWING NETWORKING CAPITAL RATIO
Interpretation : Table 4 shows that networking capital ratios is increasing year by

year in the year 2006-07 it was 0.07 it has got increased to 0.57 in the year 2009-10 it
shows that working capital is increasing year by year it is due to increase in the sales.
5) TABLE SHOWING PROPRIETARY RATIO
Year Proprietary fund Total Assets Proprietary Ratio

2006-07 7,01,95,700 26,83,39,657 0.26
2007-08 9,89,85,569 28,22,79,424 0.35
2008-09 14,63,71,366 29,47,50,124 0.50
2009-10 19,53,08,765 59,44,43,270 0.33
Page 33
5) GRAPH SHOWING PROPRIETARY RATIO
Interpretation : Table 5 shows that Proprietary ratio is increased up to FY 2008-09

but in the FY 2009-10 this has got reduced that is from 0.50 to 0.33 it shows that
assets has been increased by raising the Debt that is by raising the secured and
unsecured loans it reduces the cost of capital but increases the risk of return.
6) TABLE SHOWING DEBT EQUITY RATIO
Year Long term debt Shareholders’ equity Debt equity ratio
2006-07 14,98,74,306 7,01,95,700 2.14
2007-08 13,19,80,993 9,89,85,569 1.33

2008-09 10,79,84,100 14,63,71,366 0.74
2009-10 26,43,18,536 19,53,08,765 1.35
Page 34
6) GRAPH SHOWING DEBT EQUITY RATIO
Interpretation : Table 6 shows that from FY 2006-07 to FY 2008-09 the debt has
been reduced it means risk was getting reduced but in the FY 2009-10 its got
increased it means company has increased its risk of capital. The standard ratio is 2:1
but company is maintaining less than that it means company can raise even more
capital from Debt for future expansion.
7) TABLE SHOWING INVENTORY TURNOVER RATIO
Inventory
Year Cost of goods sold Avg. Inventory turnover ratio
2006-07 41,43,63,339 2,27,76,328 18.19
2007-08 45,52,27,264 2,16,28,514 21.05
2008-09 56,08,22,018 2,82,67,232 19.84
2009-10 85,55,94,432 2,88,33,681 29.67
Page 35
7) GRAPH SHOWING INVENTORY TURNOVER RATIO
Interpretation : The Table 7 shows that in the FY 2008-09 inventory turnover ratios
was reduced but in the FY 2009-10 it increased very highly it shows inventories are
sold very quickly than last FY. Higher inventory turnover ratio is good for the
company.
8) TABLE SHOWING INVENTORY CONVERSION PERIOD
No.of Days in Inventory Inventory

Year a year turnover ratio conversion period
2006-07 360 18.19 19.79
2007-08 360 21.05 17.10
2008-09 360 19.84 18.15
Page 36
2009-10 360 29.67 12.13
8) GRAPH SHOWING INVENTORY CONVERSION PERIOD
Interpretation : Table 8 shows the inventory conversion period for initial year that is
FY 2006-07 was high(19.79) it got reduced in the year 2007-08 again it has been
increased in the year 2008-09(18.15) but in the FY 2009-10 it has been reduced to
12.13. It means company is converting inventory into sales very early. It shows the
demand for Pepsi product is increasing.
9) TABLE SHOWING DEBTOR TURNOVER RATIO
Debtor turnover
Year Net Sales Avg. Debtors Ratio
2006-07 47,07,51,318 1,97,98,672 23.78
2007-08 51,78,26,450 2,37,28,489 21.82

2008-09 64,00,13,362 2,87,59,973 22.25
2009-10 95,21,61,933 6,07,00,866 15.69
Page 37
9) GRAPH SHOWING DEBTOR TURNOVER RATIO
Interpretation : Table 9 shows that how receivables have been collected or how
quickly or slowly the receivables have been collected. From the table we can conclude
that the debtors have been collecting very slowly it means the company is taking more
time to collect the debtors which is not good for the solvency of the company or it
will reduce the solvency position of the company.
10) TABLE SHOWING AVERAGE COLLECTION PERIOD
Debtor turnover Avg. collection

Year No.of Days ratio period
2006-07 360 23.78 15.14
2007-08 360 21.82 16.50

2008-09 360 22.25 16.18
2009-10 360 15.69 22.94
Page 38
10) GRAPH SHOWING AVERAGE COLLECTION PERIOD
Interpretation : Table 10 shows the average number days taken to collect the
debtors. As per the table the collection period was reduced in the year that is from
16.18 to 16.50 but in the FY 2009-10 it has been increased very much that is 22.94.
This shows that company is taking more time to collect the debtors which is not good
for the solvency position of the company.
11) TABLE SHOWING CREDITORS TURNOVER RATIO
Net credit Creditors turnover

Year purchase Avg. Creditors ratio
2006-07 183340014 15567156 11.78
2007-08 209479453 12300180 17.03

2008-09 274010414 10921468 25.09
Page 39
2009-10 461429930 30519478 15.12
11) GRAPH SHOWING CREDITORS TURNOVER RATIO
Interpretation : Table 11 shows that the creditors turnover ratios was increasing
from year 2006-07 to 2008-09 but it got reduced in the year 2009-10 that is in the year
2006-07 it was 11.78 but in the year 2007-08 it has been increased to 17.03 again in
the year 2008-09 it has been increased to 25.09 but it has been reduced to 15.12 in the
year 2009-10 it shows that creditors are allowing less period to pay for the purchases.
12) TABLE SHOWING FIXED ASSETS TURNOVER RATIO
Fixed Assets
Year Sales Fixed Assets turnover ratio
2006-07 470751318 213542333 2.20
2007-08 517826450 200846406 2.58
2008-09 640013362 184337909 3.47
Page 40
2009-10 952161933 299221097 3.18
12) GRAPH SHOWING FIXED ASSETS TURNOVER RATIO
Interpretation : Table 12 shows the ability to generate sales per rupee of fixed
assets. The company was generating more sales per rupee of fixed asset from year
2006-07 to 2008-09 but it got reduced in the year 2009-10. It shows that companies’
generation of sales per rupee of fixed assets reduced little bit but it is generating good
sales per rupee of fixed assets.
13) TABLE SHOWING CURRENT ASSETS TURNOVER RATIO
Current Assets
Year Sales Current Assets turnover ratio
2006-07 470751318 54797324 8.59
2007-08 517826450 81433018 6.36
2008-09 640013362 110412215 5.80
Page 41
2009-10 952161933 295222173 3.23
13) GRAPH SHOWING CURRENT ASSETS TURNOVER RATIO
Interpretation : Table 13 shows the current assets turnover ratio. The current assets
turnover ratio is reducing year by year that is in the year 2006-07 the ratio was 8.59 it
got reduced to 6.36 in the year 2007-08 again it reduced to 5.80 in the year 2008-09
and again in the year 2009-10 it has been got further reduction that is 3.23. So
companies’ turnover to current assets is reducing very much.
14) TABLE SHOWING TOTAL ASSETS TURNOVER RATIO
Total Assets
Year sales Total Assets turnover ratio
2006-07 470751318 268339657 1.75
2007-08 517826450 282279424 1.83
Page 42
2008-09 640013362 294750124 2.17
2009-10 952161933 594443270 1.60
14) GRAPH SHOWING TOTAL ASSETS TURNOVER RATIO
Interpretation : Table 14 shows how company is utilizing their total assets to

generate the sales per rupee of its total assets. The total assets turnover was increasing
from FY 2006-07 till 2008-10 but it got reduced in the FY 2009-10 it may be due to
the reduction in the current assets turnover ratio. Company is still earning better from
its assets.
15) TABLE SHOWING RETURN ON INVESTMENTS
Total Capital
Year Total Earnings Employed ROI
2006-07 59655697 238002788 25.07
2007-08 64196757 255966563 25.08
Page 43
2008-09 81560301 270526481 30.15
2009-10 101767025 510953091 19.92
15) GRAPH SHOWING RETURN ON INVESTMENTS
Interpretation : Table 15 shows overall profitability of the company for the capital
employed. The companies return for first 3 FY was good it was in increasing trend but
it got reduced in the year 2009-10 it shows that in the last FY the company is getting
less return on the capital employed.
16) TABLE SHOWING RETURN ON EQUITY
year PAT Net worth ROE
2006-07 34289251 60943666 56.26
2007-08 36146150 82666318 43.73
Page 44
2008-09 55546779 138881097 40.00
2009-10 65935808 152663722 43.19
16) GRAPH SHOWING RETURN ON EQUITY
Interpretation : Table 16 shows the profitability of equity funds invested in the

business. The return to the equity holders was reducing from 2007-08 till 2008-09 but
in the FY 2009-10 it got increased it means the equity holders are getting better
returns to their capital or their investment. It shows company is given better dividend
to equity holders.
17) TABLE SHOWING GROSS PROFIT PROFIT RATIO
Gross profit
year Gross profit Sales margin ratios
Page 45
2006-07 237672495 470751318 50.49
2007-08 262965384 517826450 50.78
2008-09 315901313 640013362 49.36
2009-10 435671115 952161933 45.76
17) GRAPH SHOWING GROSS PROFIT PROFIT RATIO
Interpretation : Table 17 shows the basic profitability of the company. The table
shows that the companies basic profitability has been reduced very much even though
company is earning good sales the basic profit is been reduced. It shows the company
is following sales maximization policy rather than profit maximization policy.
18) TABLE SHOWING NET PROFIT RATIO
Net profit
year Net profit Sales margin ratio
Page 46
2006-07 28550513 470751318 6.06
2007-08 61985705 517826450 11.97
2008-09 111519726 640013362 17.42
2009-10 165853013 952161933 17.42
18) GRAPH SHOWING NET PROFIT RATIO
Interpretation : Table 18 shows that initially the net profit margin was less but year
by year it is increasing. In the FY 2006-07 the ratio was 6.06 it has been increased to
11.97 in the year 2007-08 again in the FY 2008-09 it has been increased to17.42 but
in the year 2009-10 the company has maintained same rate of profit even though its
sales increased it shows company is making sales maximization policy.
CHAPTER V
FINDINGS AND SUGGESTIONS
FINDINGS:
Page 47
• Current ratio was increasing from FY 2006-07 till 2007-08 but it has been
reduced in the FY 2009-10. But company is maintaining good solvency
ratio that is 2.34:1 as compared to standard ratio that is 2:1 so company is
having good solvency position in the short run.
• The company’s Quick ratio is increasing year by year it shows the

company has good liquidity position.
• The cash ratio of the company has decreased in the last FY it shows
company reduced its cash position.
• Net working capital ratio is increasing year by year it shows good for the
manufacturing company. It is considered as good measure of safety.
• The proprietary ratio was increasing in the first 3 FY but in the FY 2009-
10 it has been reduced it Shows Company is raising funds from debt.
• The debt equity ratio shows that the company was reduced debt for first 3
years but in the financial year 2009-10 it has got increased it shows
company’s risk has been increased.
• The inventory turnover ratio for the last FY i.e 2000-10 is very high it
shows the company is converting inventories into sales very quickly which
is good for the company. Due to this the conversion period has been
reduced.
• The debtors’ turnover ratio is decreased so company is making more credit

sales and it is collecting very slowly.
Page 48
• Fixed assets turnover ratio is increased it means the company is utilizing
its fixed assets effectively and efficiently but current assets and total assets
turnover ratio is been reduced.
• The company’s ROI is been reducing year by year which is not good for
the stake holders of the company.
• The return on equity(ROE) was reducing for first 3 year but in the FY
2009-10 that is last year it has been increased which is good for the share
holders.
• The gross profit is been reduced year by year but net profit is been
increased for first 3 years but remained same in both FY 2008-09 & 2009-
10.
• Even though company’s sales is increasing the profit remained unchanged

it shows the company is following sales maximization policy.
SUGGETIONS:
• The company has to use proper collection mechanism to reduce the

collection period. It can do it by giving incentives for early payment
• Company should not increase capital from Debt which is very risk for the
company.
• Company’s current assets turnover ratio is been reduced so company has

to utilize current assets properly.
Page 49
• Company has to increase ROI. By using profit maximization policy in the
long run
CONCLUSION
After doing this project I come to know that Nectar Beverages private limited
company has a very sound financial position also I come to know how we can analyze
the financial position of the company through various financial ratios. This project
also indicates that Nectar Beverages private limited company has both long term and
short term solvency. Company has also got good position to survive in the long run.
Page 50
CHAPTER VI
BIBLIOGRAPHY
1. FINANCIAL MANAGEMENT (FIFTH EDITION)
M.Y.KHAN & P.K.JAIN
2. FINANCIAL MANAGEMENT (NINTH EDITION)
I.M.PANDEY
3. FINANCIAL MANAGEMENT
BALIGAR
4. COMPANY WEBSITE
www.nectarbeveragesdharwad.com
Page 51
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Executive summary

Nectar Beverages Pvt Ltd is located on the outskirts of Dharwad city on

Objectives of the study:

 To know Company’s ability regarding how it will maintain good financial

 To ascertain level of profit generated by Nectar Beverages Pvt Ltd, Dharwad

 To suggest possible future financial liquidity position of the firm.

• The company’s Quick ratio is increasing year by year it shows the

• Fixed assets turnover ratio is increased it means the company is utilizing

INTRODUCTION ABOUT INDUSTRY:

Major Players in India

Soft drink production area

Introduction about the topic:

“Study of Financial position of Nectar Beverages Pvt.Ltd Dharwad

Financial analysis is the process of identifying the financial strengths and

comparison of ratios, which are derived from the information in a company’s

make inferences about a company’s financial condition, its operations and

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as

“The indicated quotient of two mathematical expressions” and as “The relationship

evaluating the financial positions and performances of a firm. The absolute

accounting figures repeated in the financial statements do not provide a meaningful

understanding of the performance and position of a firm. An accounting figures

conveys meaning when it is related to some other relevant information. The

relationship between two or more accounting figures/ groups is called financial

qualitative judgement about the firm’s financial performance.

NATURE OF RATIO ANALYSIS

Ratio analysis is a technique of analysis and interpretation of financial

in making certain decisions. It is only a means of understanding of financial strengths

and weaknesses of a firm.

Significance of ratio analysis:

As a tool of financial management, ratios are of crucial significance. The

Ratio analysis is relevant in assessing the performance of a firm in respect of the

II. Long term solvency

III. Operating efficiency

IV. Overall profitability

VI. Trend analysis

Objectives of the study:

 To know Company’s ability regarding how it will maintain good financial

 To ascertain level of profit generated by Nectar Beverages Pvt Ltd, Dharwad

 To suggest possible future financial liquidity position of the firm.

Limitations of the study:

and loss account.

view point of secrecy that the company would like to observe.

 The time limit for the study was another limitation.

Soft drinks market in India:

PepsiCo nourishes consumers with a range of products from treats to healthy

About Nectar Dharwad!

On November 23, 1997, Goa Bottling began producing products of Pepsi

It believes that local businesses, entrepreneurs, people, are best managed by

Specially because if Nectar Beverages was going to produce international

Nature of the Business carried:

Our mission is to be the world's premier consumer Products Company focused

Our Quality Policy:

Nectar Beverages has a long-standing commitment to protecting the

Plant Nectar Beverages Pvt.Ltd. Dharwad:

Competitor’s information:Nectar Beverages Pvt Ltd facing the competition

For Pepsi Coca Cola and Thumps Up

Mirinda (Orange) Fanta

Mirinda (Lemon) Limca

Aquafina Kinley water

Nectar Beverages Dharwad Management!

HUMAN RESOURCE DEPARTMENT

Human Resource Management (HRM) is the function within an organization