Nestlé

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Nestlé is a Swiss multinational food and drinks processing conglomerate corporation

headquartered in Switzerland.It is one of the largest companies in the world.it has 448 factories
around the world and operates in 190 different countries. Nestlé's company provides products
like baby food, medical food, bottled water, breakfast cereals, coffee and tea, confectionery,
dairy products, ice cream, frozen food, pet foods, and snacks. There are 29 Nestlé's brands
which includes Nespresso, Nescafé, Kit Kat, Smarties, Nesquik, Stouffer's, Vittel, and Maggi.

NESTLÉ has been a partner in India's growth for over a century now. As a result, they have
developed an extraordinary relationship of commitment and trust with the Indian people. The
activities of the Companies in India have promoted direct and indirect employment and gave
livelihood to about one million people, including farmers, suppliers of packaging materials,
services and other goods.

The Company continuously focuses on its efforts to better understand India's changing lifestyles
and predict customer needs to provide Taste, Nutrition, Health and Wellness through its product
offerings. The culture of innovation and improvement within the Company and access to the
NESTLÉ Group's proprietary technology/Brands expertise, and the substantial centralized
Research and Development facilities provides it with a definite advantage in these efforts. In
addition, it helps the Company build value that can be provided over the long term by giving
consumers a broad variety of high quality, safe food products at affordable prices.

NESTLÉ India produces products of absolutely international quality in the name of

internationally famous brand such as NESCAFÉ, MAGGI, MILKY BAR, KIT KAT, BAR-
ONE, MILKMAID and NESTEA and recently, the Company has also launched products of daily
consumption and use such as NESTLÉ Milk, NESTLÉ SLIM Milk, NESTLÉ Dahi and NESTLÉ
Jeera Raita.NESTLÉ India is a reliable organisation and promotes initiatives that help to enhance
the quality of life in the communities where it operates.

Mission Statement

Nestlé is the world's leading nutrition, health and wellness company. Our mission of "Good
Food, Good Life" is to provide consumers with the best tasting, most nutritious choices in a wide
range of food and beverage categories and eating occasions, from morning to night.

vision and values

To be a leading, competitive, Nutrition, Health and Wellness Company delivering improved

shareholder value by being a preferred corporate citizen, preferred employer, preferred supplier
selling preferred products.

Objectives

Marketing objectives are compatible with the overall corporate objectives of nestle. Company’s
objective is to be the world’s largest and best branded food manufacturer while ensuring that
Nestle's name is synonymous with the products of the highest quality.

Business objectives are

● The business objective is to produce and market the products of the company in such a
way that it needs to create value that can be sustained over the long term for shareholders,
employees, consumers, and business partners.
● They do not favour short-term profit at the expense of successful long-term business
development.
● It understands that its consumers have a genuine and reliable interest in the company's
behaviour, beliefs, and actions behind brands in which they put their trust. Without its
 consumers, the Company would not exist. So they consider the needs and wants of
consumers.
● They have a general rule; legislation is the most efficient protection of responsible
conduct. In certain areas, additional guidance to staff in voluntary business principles is
advantageous to assure that the highest standards are met throughout the organization.
● It is known that the success of a corporation reflects the professionalism, conduct, and
responsible attitude of its management and employees. Therefore recruitment of the right
people and ongoing training and development is crucial.
● It maintains its commitment to follow and respect all appropriate local laws in each of its
markets.

HISTORY:

Nestle started its work as a multinational company in 1866.From the time they started they have

provided their best to their customers and the history of Nestle is given below:

1866 - 1905:

The history of Nestle begins in 1866 when Henri Nestlé, a pharmacist, developed a food for

babies who were unable to feed was his first success. People started recognizing the value of the

new product, after Nestlé's new product saved the child's life, Farine Lactee Henri Nestle was

being sold in more numbers in Europe.

1905 – 1918:

In the year 1905 Nestle merged with the Anglo-Swiss Condensed Milk Company. By early

1900s, the company started operating factories in countries like US, Britain,Germany and Spain.

World War I created great demand for dairy products in the form of government contracts. By

the end of world war, Nestle’s production was increased.

1918 – 1938:

After World war Government contracts dried up and consumers switched back to fresh milk.

However, Nestle's management responded quickly with streamlining operations and reducing

debts. In 1920s Nestle witnessed its first expansion into new products, with production of

chocolate,which was the second most important activity of the company.

1938 – 1944:

Nestle started witnessing effects of World War II. Profits dropped from $20million in 1938 to $6

million in 1939. Factories were established in developing countries, especially in Latin America.

Ironically, war helped with the introduction of the Company's newest product, Nescafe, which

was a staple drink of the US military force. Nestle’s production and sales rose during war time.

1944 – 1975:

End of World War II was one of the kick-off points of a dynamic phase for Nestle.Growth was

accelerated and companies were acquired. In 1947 Nestle merged with Maggi,a manufacturer of

seasonings and soups. Crosse & Blackwell followed in 1960, Findus(1963), Libby's(1971) and

Stouffer's(1973). Diversification came with shareholding in L'Oreal in the year 1974.

1975 – 1981:

Nestle’s growth in the developing world to a certain extent a slowdown in the Company's

traditional market. Nestle made it’s second venture outside the food industry by acquiring Alcon

Laboratories Inc.

1981 – 1995:
Nestle divested a number of businesses 1980 -1984. In 1984, Nestle's improved bottom line

allowed the Company to launch a new round of acquisitions, which was the American food giant

Carnation.

1996 – 2002:

The first half of the 1990s shown to be favorable for Nestle the trade barrier scrumbled and

world markets were developed into more or less as integrated trading areas. Since 1996,

acquisitions have been taking place such as San Pellegrino(1997),Spillers Pet foods(1998) and

Ralston Purina(2002). The two major acquisitions in North America, both in 2002: in July,

Nestle merged U.S. ice cream business into Dreyer’s and in the month of August, a USD 2.6

billion acquisition was announced by Chef America, Inc.

2003 +:

The year 2003 started well with the acquisition of Movenpick Ice Cream,enhancing Nestle's

position as one of the world market leaders in the product category. In the year 2006, Jenny

Craig and Uncle Toby's were added to the Nestle portfolio and in 2007 saw Novartis Medical

Nutrition, Gerber and Henniez join the Company.

International Business Model are

Nestle’s business model breaks in to four pillars and they are:

1. Localisation Approach

Nestle is great in understanding consumers needs through its innovation of the international
markets. Nestle products are marked and increased its localization approach. the whole idea of
Nestle to groom its different geographical localization by introducing new local flavors in
product and attracting local language while marketing. This has helped the company address
uncertainties when it comes to international trade.

2. Improves Margins

The idea of tough and careful cost management has always enabled Nestle to rotate its
structural savings program not only across manufacturing units but also beyond its
administration and procurement.

The report says, the company reported 1.9 billion Swiss Franc was savings at the end of 2019.
The low productive units were closed completely and fixed overheads were minimized by 5.5%.
The global buying certified special traction in 2018 from just 55% to 61% in 2019. The entire
methodology was towards minimizing unwanted costs and powering operational productivity at
all levels through all its processes and also improved automation. Nestle's approach towards
developing margins can be qualified to its first-class executive team directing its foreign trade
and policy matters. To be work in such an inspiring environment calls for a great deal of
knowledge and realization of international trade. For those aiming to work in such great and
wonderful organizations, it is critical to develop specific competencies by exploring courses
such as the Executive Post Graduate Diploma in International Business Strategy (EPGDIBS)
offered by IIFT (Indian Institute of Foreign Trade). The course curriculum rotates around
offering and teaching an understanding of core main concepts and working principles and
strategy of International Business.
 3. Allocate Capital and Resources with Clearness

Investing in right growth drivers and value-creating acquisitions have been at the core of
Nestle's success. Every year the company has invested in R&D, brand position and towards
sustainable development operations. When we talk about acquisitions, the company had its
governance policies to be followed in place along with its given targets. They say that from
first January 2020, it's Group new Strategy and the Business Development Function became
operational.

4. Build Shared Value between stakeholders and the company

Nestle is known for creating phantastic value for each stakeholder that makes up the brand
position of Nestle. They are 2000 brands run by 291000 different employees globally, the
company has working and taken it as a mission to:

● To Improve the quality of life in all type of communities and its operating
● Introducing innovative and better products for better living
● Reduce maximum impact on the environment by focusing on sustainability and
maintaining and safeguarding resources for future generations.
● Safeguarding long term growth through resource optimization and improved margins

We can conclude by saying that the entire success story of Nestle lays on its exciting
trade landscapes, challenging giving tough competition and commitment in delivering
goods and keeping its customers happy.
SECTION B

ORGANISATIONAL ANALYSIS

SWOC ANALYSIS OF NESTLE INDIA LTD:

STRENGTHS:

1)The company enjoys good support of parent company Nestlé S.A. which is a nutrition, health
and wellness company headquartered in Switzerland.

2) The company has strong brands like Nescafe, milkmaid, kit kat, etc and the company is
known for product innovation.

3) Nestle has Diversified product portfolio which includes baby foods, bottled water, cereals,
chocolates, coffee, dairy products, drinks, nutritional products, ice-cream etc.

4) Good leadership.

5)Nestle has been Operating in India for over 105 years.

6)The Company has provided direct and indirect employment to over one million people
including farmers, suppliers of packaging materials and other.

7) Nestle India, achieved a major landmark in the financial year 2017 as the first listed food
company to cross Rs.10,000 crore in sales in India.

8) Good performance in the stock market.

9)Penetrating urban as well as rural markets.

10)Locally adopted distribution methods.

WEAKNESSES:
1)Nestle India was totally unaware and was ill prepared to handle a regulator's call on Maggi
ban.

2)The responses to the Maggi ban were a very brief response and were not adequately culture
sensitive.

3)Heavy dependence on nutrition and milk products, the largest category which contributes
nearly 47.6% to the company's top line, is another prime weakness of the Nestle company.

4)Many brands under the same umbrella.

OPPORTUNITIES:

1)Nestle has excellent Potential in beverage and confectionery segments.

2)The Company has a global portfolio of around 2,000 brands including best selling brands like
Aero, Cerelac, Nescafe, Boost, Kit Kat, Crunch, S. Milo, Nestea, Nesquik, Dreyer’s etc. however
in India they are operating with a truncated portfolio of just 20 brands. So, the company can
capitalise on the product and brand strength of the parent company

3)Penetrating more in the rural markets.

CHALLENGES:

1)Management Challenges

2)Nestle has to conduct a continuous recruitment process on a regular basis which is difficult.

3)Finding efficient employees is a challenge as well.

PORTER’S FIVE FORCES MODEL

Porter’s Five Forces Model is very important; it's used to analyze the industrial parameters and

to develop innovative business strategy. These five different factors have been discussed to

highlight the attractiveness and productivity of a market.

1) THREAT OF NEW ENTRANTS OR APPLICANTS

If the market is attractive, the new applicants will always be a threat for the company but if the

market has been restricted to a less limited resource and we can see very few areas of

improvement so it becomes difficult for new applicants to get into the market and also for

monopolies to exist. Although Nestle has achieved a strong name in the market but as the food

processing industry is very huge and viable; so there are a lot of other companies who have

already entered in this market and also achieved a place in the market even though they could not

cross Nestle in terms of market share. Every year a number of companies put efforts to enter the

market and make up for their share of profit and productivity in the market but very few survive.

Nestle has been the sole leader for almost a century so now it has become a very big challenge

for the new applicants to not only work over their quality but also they have to complete the

share of Nestle to survive which is quite impossible. Lastly, Nestlé is insistently on the board,

and therefore the threat of new applicants is temperate.

2) THREAT OF SUBSTITUTE GOODS

Substitutes have always been in track when we talk about products in the market, every product

has its own substitute present which leads it to the heights of competition when it's taken

seriously. As the product is a very common and daily use product so the demand for substitutes

is very high here. Like if we take an example of bottled water so the substitute or alternative of

this is lean pockets that play as a competition. So now it’s important Nestle has to innovate its
products tremendously to stay in the market and to work effectively efficiently to remove the

threat of substitutes. We can take this example of recent innovation which Nestle came up with

its health consciousness and wellness factor that has been introduced and encouraged in all

products of Nestle. Such initiatives and new strategies would make it easier for Nestle to go

beyond the substitutes.

3) BARGAINING POWER OF SUPPLIERS

Bargaining power of suppliers is a very important tool or factor to be considered in any industry

because they are the main strength of the company. We all know Nestle is known for strong

relations with the suppliers around the globe due to their immense buying power and also

because of the main fact that in such dairy and agricultural products quality is always very

important. Nestle has always focused on strong and secure business relations to make the

ongoing products quality stronger. Nestlé also presents helpful guidance and training to its

suppliers on how to work more proficiently to decrease jobless expenses. And thus it cares of its

suppliers which in return pays them off in the form of quality products with good profit

4) BARGAINING POWER OF CUSTOMERS

The bargaining power of customers has always played an important factor in terms of a

company's performance and development so this can be considered reasonable value while

accessing the company’s position. Customers carry a huge quantity of bargaining power

concerning their utilization and satisfaction of different Nestlé products. Although a lot of

substitute and alternative products and competitors Nestle customers have very effective choices

but still the quality that has been maintained by Nestle has made it very successful among all

other users. It is very important to understand the power of the customers and also their needs

and wants . so that they can be better and be satisfied. This is what Nestle always cares about and
that is the effects on Nestle health and other wellness programs that are being used while

creating new products as society has in progress of becoming more health conscious and trusting

the Nestle brand .

5) COMPETITIVE RIVALRY WITHIN THE INDUSTRY

Competition basically if it's healthy would bring huge success but same if its negative would

destroy and spoil the whole industry so it should be carefully analyzed for better future running

of the company. Nestle has a very strong position in the food processing industry but few major

challenges do exist in the industry like Kraft Foods and Groupe Danone. The Above-mentioned

companies are fighting continuously to get on to each other and avoid any sort of competition but

still those companies are there. If we talk about marketing and advertising these companies

spend huge amounts on expenditures for the purpose of effective marketing and advertising and

in competition they have always performed against each other giving tough competition .

Competition is ferocious in the food processing industry, and this is a plus point and great

opportunity for consumers. Provided these companies carry on in competing with each other,

consumers will over eagerly enjoy improving product qualities.

STRATEGIC ANALYSIS

1) MARKETING AND SALES

Nestle always brings new ideas to implement in the market for their products. If we look at their
advertising and marketing strategy they always come up with new extensive advertisements for
its individual brands and products. When Nestle came to market they bought Nescafe tunes
which are still perceived in the minds of customers till now. Take an example of a Maggie each
and every nook customer knows about Maggie, Maggie is associated with 2 min snacks which is
specially for mothers where they can cook easily. This strategy was famous among mothers and
kids. They always focus on the quality and nutritional value of the products. Strong presence of
Maggie and the customer love towards the product have pushed Nestle sales and promotions. it
has always hit the above line of marketing strategy. The strong base of Nestle is its product
portfolio that makes it different from its competitors. Nestle uses all media platforms like tv,
print, online, hoardings for its promotion.

2) OPERATIONAL STRATEGIES:

The operations strategy of Nestle is exceptionally contributed with the aid of using the utility of
nutrition, fitness and well-being methods. The unique method is designed to guide the human
beings needing to have a healthful life-style. The operations are designed with the aid of using
the realistic contributions from innovation, that's constantly pushed with the aid of using the
organisation through the industry-main studies and improvement. The complete state of affairs
helps the regular transformation of the meals and beverage portfolio of the enterprise. Apart from
that, the studies and improvement activities of Nestle are constantly specializing in exploring the
jobs of dietary remedies for ensuring the development of the fitness and life-style of human
beings. With the assistance of those activities, the organisation is growing to specialize in
growing the attention of a number of the human beings from one-of-a-kind groups for taking
greater care of their fitness and well-being aspects. Hence, the operations strategy of Nestle is
essentially primarily based totally on striving to supply a wonderful effect at the several societies
the world over concerning their sports. In order to attain the precise aim, Nestle constantly stocks
diverse insights concerning the worldwide nutrition, fitness and well-being challenges, builds
advanced partnerships with different primary companies, and engages with the policymakers,
key leaders, and stakeholders from the unique geographical vicinity of organisation operations.

Primary activities of Nestle’s operations strategy are:

1)Product and service design

2)Process design
3)Planning and control

4)Innovation and improvement

5)Supply chain

6)Quality management
FINANCIAL ANALYSIS

Financial analysis refers to the technique of comparing budgets, projects, different finance
related transactions, organisations to decide their performance and suitability. Financial analysis
can be done using different ratios like solvency ratio, profitability ratio, liquidity ratio to
understand the financial investment.

3 year financial highlights

SOLVENCY RATIO

Among the different metrics, solvency ratio is the one that helps decide whether or not a
business enterprise can remain solvent in the long run. It is based on the actual cash flow,
i.e. adding depreciation and other non-cash expenses to the net income of the company. It
considers all the liabilities (short-term and long-term debt) instead of just the current
liabilities or the short-term debt.

Types of solvency ratio:

● Interest Coverage Ratio: Earnings Before Interest and Tax / Interest Expenses

The interest coverage ratio measures how many times a company can cover its
current interest payments with its available earnings. (Hayes, 2021)
 ● Debt-to-Asset Ratio: Debt / Asset

The debt-to-asset ratio measures a company's leverage and indicates how much of
the company is funded by debt versus assets, and therefore, its ability to pay off
its debt with its available assets. (Hayes, 2021)

● Shareholder Equity Ratio: Total Shareholder Equity / Total Assets

The equity ratio, or equity-to-assets, shows how much of a company is funded by

equity as opposed to debt. (Hayes, 2021)

● Debt-to-Equity Ratio: Debt / Equity

The debt-to-equity ratio looks at how much of the debt can be covered by equity
if the company needed to liquidate. (Hayes, 2021)

Interest Coverage Ratio Calculation

Interest Coverage Ratio 2020 = Earnings Before Interest and Tax 2020 / Interest Expenses 2020

= (28788.9 + 1641.8) / 1641.8

= 30430.7 /1641.81

=18.53 times

Interest Coverage Ratio 2019 = Earnings Before Interest and Tax 2019 / Interest Expenses 2019

= (25858.4+ 1198.3) / 1198.3

= 27056.7/ 1198.3

=22.58 times
Interest Coverage Ratio 2018 = Earnings Before Interest and Tax 2018 / Interest Expenses 2018

= (23328.1 +1119.5) / 1119.5

= 24447.6/ 1119.5

=21.84 times

Interpretation:

● The EBIT for the fiscal year 2018 was 23328.1 million , which increased to 25858.4
million in the fiscal year 2019, which further increased to 28788.9 million in the fiscal
year 2020.
● The Interest expense in the fiscal year 2018 was 1119.5 million , which increased to
1198.3 million in the fiscal year 2019, which further increased to 1641.8 million in the
fiscal year 2020.
● The Interest coverage ratio in the fiscal year 2018 was 21.84 (the company can cover
21.84 times of its current interest expenses with its available earnings), which increased
to 22.58 in the fiscal year 2019 (the company can cover 22.58 times of its current interest
expenses with its available earnings), which further decreased to 18.53 in the fiscal year
2020 (the company can cover 18.53 times of its current interest expenses with its
available earnings).
● There was an increase of 3.43% in the ratio from 2018 to 2019 and a decrease of 17.94%
in the ratio from 2019 to 2020.
● There has been an increase in the ratio in the past 3 years since the EBIT and Interest
expenses both are increasing.
● A higher Interest coverage ratio is better for the company.But the interest coverage ratio
increased from the year 2018 to 2019 but in 202o the ratio decreased due to increase in
the interest.

Debt-to-Asset Ratio Calculation

Debt-to-Asset Ratio 2020 = Debt / Asset

=58803.9 / 78997.3

= 0.7444 or 74.44 %

Debt-to-Asset Ratio 2019 = Debt / Asset

=52540.7 / 71729.4

= 0.7325 or 73.25%

Debt-to-Asset Ratio 2018 = Debt / Asset

=45503.5 / 82118.1

= 0.5541 or 55.41%

Interpretation:

● The Debt in the fiscal year 2018 was 45503.5 million , which increased to 52540.7
million in the fiscal year 2019, which further increased to 58803.9 million in the fiscal
year 2020.
● The Asset in the fiscal year 2018 was 82118.1 million, which decreased to 71729.4
million in the fiscal year 2019, which further increased to 78997.3 million in the fiscal
year 2020.
● The Debt-to-Asset ratio for the fiscal year 2018 was 0.5541 (company is funded by
55.41% of debt and 44.59% of equity), which increased to 0.7325 in the fiscal year 2019
(company is funded by 73.25% of debt and 26.75% of equity), which further increased to
0.7444 in the fiscal year 2020 (company is funded by 74.44% of debt and 25.56% of
equity).
● The ratio which has been less than 1 in the past 3 years which means that the assets of the
company are more than its debts and the company can pay off its debts by selling the
assets if needed.
 ● Since there has been a slight increase over the years it could mean that the financial risk
of the company is deteriorating.

Shareholder Equity Ratio Calculation

Shareholder Equity Ratio 2020 = Total Shareholder Equity / Total Assets

=20193.4 / 78997.3

= 0.2556 or 25.56%

Shareholder Equity Ratio 2019 = Total Shareholder Equity / Total Assets

=19188.7 / 71729.4

= 0.2675 or 26.75%

Shareholder Equity Ratio 2018 = Total Shareholder Equity / Total Assets

=36614.6 / 82118.1

= 0.4459 or 44.59%

Interpretation:

● The Shareholder equity in the fiscal year 2018 was 36614.6 million, which decreased to
19188.7 million in the fiscal year 2019, which increased to 20193.4 million in the fiscal
year 2020.
● The Asset in the fiscal year 2018 was 82118.1 million, which decreased to 71729.4
million in the fiscal year 2019, which further increased to 78997.3 million in the fiscal
year 2020.
● The Shareholder Equity ratio for the fiscal year 2018 was 0.4459 (company is funded by
44.59% of equity and 55.41% of debt), which decreased to 0.2675 in the fiscal year 2019
(company is funded by 26.75% of equity and 73.25% of debt), which further decreased to
0.2556 in the fiscal year 2020 (company is funded by 25.56% of equity and 74.44% of
debt).
 ● With regards to this ratio, a higher ratio is healthier for a company. But as seen from
above calculations it can be said that the company has more debt than equity in its books.

Debt-to-Equity Ratio Calculation

Debt-to-Equity Ratio 2020 = Debt / Equity

=58803.9 / 20193.4

= 2.91

Debt-to-Equity Ratio 2019 = Debt / Equity

=52540.7 / 19188.7

= 2.74

Debt-to-Equity Ratio 2018 = Debt / Equity

= 45503.5/ 36614.6

= 1.24

Interpretation:

● The Debt in the fiscal year 2018 was 45503.5 million , which increased to 52540.7
million in the fiscal year 2019, which further increased to 58803.9 million in the fiscal
year 2020.
● The Shareholder equity in the fiscal year 2018 was 36614.6 million, which decreased to
19188.7 million in the fiscal year 2019, which increased to 20193.4 million in the fiscal
year 2020.
● The Debt-to-Equity ratio for the fiscal year 2018 was 1.24, which increased to 2.74 in the
fiscal year 2019, which further increased to 2.91 in the fiscal year 2020.
● The company has more debt in its books when compared to equity which means that a
major part of the finance is obtained by borrowing money and there are higher chances
for default.
 ● There is a greater risk or chance of bankruptcy.

PROFITABILITY RATIO

Profitability ratios are management tools to evaluate the ability of the company to generate
income with respect to its revenue, assets, and the capital employed. In short, profitability ratios
demonstrate how efficiently a company can perform its operations to earn profit and generate
value for its shareholders. The higher ratios are always favorable for the company. But when the
ratios of a company are weighed with the ratios of the similar company or the previous years;
then it can generate more meaningful information. When the ratios are higher than the similar
company or the previous year means that the company is performing well in the market.

Types of Profitability Ratio

● Gross Profit Ratio: Gross Profit / Net Sales

The gross profit ratio is a most commonly used tool to measure the relationship between
the gross profit and total sales of an organization. Hence, the management can evaluate
the operational efficiency of the firm.

● Return on Investment: Net Profit / Cost of Investment

Return on Investment is a management tool to assess the benefit received by an investor

in relation to the cost he invested for the business. Higher the ratio better the benefit
enjoyed by the investors.

Advantages of Profitability Ratio

● It measures the efficiency of the investment.

● It helps in implementing improvement.
● The ratio facilitates channeling of investment.
● Attracting investors.
● Evaluation of asset performance
Disadvantages of Profitability Ratio

● Not universally applicable

● Subjected to manipulations
● Impacted from mistakes

Gross Profit Ratio Calculation

Gross Profit Ratio 2020 = Gross Profit / Net Sales

=75130.9 / 132901.6

= 0.565

Gross Profit Ratio 2019 = Gross Profit / Net Sales

= 69828/122952.7

= 0.568

Gross Profit Ratio 2018 = Gross Profit / Net Sales

=65356.9 /112162.3

= 0.583

Interpretation:

● The Gross Profit during the year 2018 was 65356.9 million, in 2019 it comes to 69828
million and during the period 2020 it was 75130.9 million.
● In 2018 the net sales was 112162.3 million, in 2019 the net sales increased to 122952.7
million and in 2020 it rose up to 132901.6 million.
● The Gross Profit Ratio for the year 2018 was 0.583, in 2019 it decreased to 0.568 and in
the third year 2020 the ratio dropped to 0.565.
● Even though the net sales were increasing over the years; the gross profit was decreasing
due to the declining Gross Profit Ratio.
ECONOMIC VALUE ADDED (EVA)

An estimate of a company’s genuine economic profit is calculated using economic value added.
It’s the value created over and beyond the investor’s necessary return. EVA is a valuable metric
for determining a company’s economic success (or failure) over time. It’s a statistic for
calculating shareholder value creation. EVA is the gap between the profit made by the company
and the profit lost by the company.

MARKET VALUE ADDED (MVA)

The gap between a company's current total market value and the capital given by investors is
known as MVA (including both shareholders and bondholders). MVAs are representations of
value created by a company's management's actions and investments. A high MVA indicates that
the value of management's activities and investments exceeds the value of capital contributed by
the company.