Hindusthan College of Engineering and Technology

Approved by AICTE, New Delhi, Accredited with ‘A’ Grade by NAAC

(An Autonomous Institution, Affiliated to Anna University, Chennai)
Coimbatore – 641 032

Department of Management Sciences

COURSE CODE : 20BA1203

COURSE NAME: ACCOUNTING FOR MANAGERS

Internal Component – I

TOPIC ON : FINANCIAL ANALYSIS OF ITC LTD

Student Name : S. PRIYA DHARSHINI

Register Number : 720722206038
Submission Date : 19.01.2023

Evaluation Criteria:

Criteria Marks

Content (10 marks)

Presentation (5 Marks)

TOTAL (20 Marks)

Faculty Incharge : Dr . S. KAMALASARAVANAN

Faculty Signature:
INTRODUCTION :
ITC is an Indian public conglomerate company headquartered in Kolkata, West Bengal, India. Its
diversified business includes four segments: Fast Moving Consumer Goods (FMCG), Hotels,
Paperboards, Paper & Packaging and Agri Business. ITC's annual turnover stood at $7 billion and
market capitalization of over $33 billion. The company has its registered office in Kolkata. It started
off as the Imperial Tobacco Company, and shares ancestry with Imperial Tobacco of the United
Kingdom, but it is now fully independent, and was rechristened to India Tobacco Company in 1970
and then to I.T.C. Limited in 1974. The company is currently headed by Yogesh Chander Deveshwar.
It employs over 26,000 people at more than 60 locations across India and is listed on Forbes 2000.
ITC Limited completed 100 years on 24 August 2010. ITC has a diversified presence in FMCG (Fast
Moving Consumer Goods), Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business and
Information Technology. While ITC is an outstanding market leader in its traditional businesses of
Hotels, Paperboards, Packaging, Agri- Exports and Cigarettes, it is rapidly gaining market share even
in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal Care and
Stationery.

BOARD OF DIRECTORS :
CHAIRMAN Y C Deveshwar EXECUTIVE DIRECTORS Nakul Anand P V Dhobale K N Grant
NON-EXECUTIVE DIRECTORS A Baijal S Banerjee AV Girija Kumar S H Khan S B Mathur D K
Mehrotra H G Powell P B Ramanujam Anthony Ruys Basudeb Sen K Vaidyanath B Vijayaraghavan

LIST OF PRODUCTS & BRANDS In FMCG, ITC has a strong presence in:

 Cigarettes:  W. D. & H. O. Wills,  Gold Flake Kings,  Gold Flake Premium,  Navy
Cut,  Insignia,  India Kings,  Classic  Verve,  Menthol,  Menthol Rush,  Regular,Citric
Twist,  Mild & Ultra Mild,  555,  Benson & Hedges,  Silk Cut,  Scissors,  Capstan, 
Berkeley,  Bristol,  Lucky Strike,  Players and  Flake.  Foods:  Kitchens of India; 
Aashirvaad,  Minto,  Sunfeast,  Candyman,  Bingo,  Yippee,  Sunfeast Pasta brands in
Ready to Eat, Staples, Biscuits, Confectionery, Noodles and Snack Foods

 Apparel:  Wills Lifestyle and  John Players ;  Personal care:  Fiama di Wills;  Vivel; 
Essenza di Wills;  Superia;  Vivel di Wills brands of products in perfumes, hair care and skincare
 Stationery:  Classmate and  PaperKraft brands  Safety Matches and Agarbattis:  iKno; 
Mangaldeep;  Aim brands Other businesses include:  Hotels: ITC's hotels (under brands including
WelcomHotel) have evolved into being India's second largest hotel chain with over 80 hotels
throughout the country. ITC is also the exclusive franchise in India of two brands owned by Sheraton
International Inc.- The Luxury Collection and Sheraton which ITC uses in association with its own
brands in the luxury 5 star segment. Brands in the hospitality sector owned and operated by its
subsidiaries include Fortune and Welcome Heritage brands.  Paperboard, Specialty Paper, Graphic
and other Paper;  Packaging and Printing for diverse international and Indian clientele.  Infotech
(through its fully owned subsidiary ITC Infotech India Limited which is a SEI CMM Level 5
company)

MISSION:
To enhance the wealth generating capability of the enterprise in a globalising environment, delivering
superior and sustainable stakeholder value.

VISION:
Sustain ITC’s position as one of India’s most valuable corporations through world class
performance , creating growing value for the Indian economy and the company’s stake holders .

TOOLS OF ANALYSIS:
For analysis, the data collected through secondary source especially the financial statement
of the company, statistical tool such as ratio analysis and comparative balance sheet are used
and the results are interpreted using tables, graphs and bar diagrams.

TOOLS USED FOR THE ANALYSIS:

1) Current Ratio = Current Asset

----------------------
Current Liabilities

2) Liquid Ratio = Liquid Asset

-------------------------
Current Liabilities

3) Absolute Liquid Ratio = Absolute Liquid Asset

--------------------------------
Current Liabilities

4) Gross Profit Ratio = Gross Profit

----------------------------- * 100
Revenue from Operations

5) Net Profit Ratio = Net profit for the period

---------------------------------------- *100
Revenue from operations

RATIO ANALYSIS:
 An analysis of financial statements based on ratios is known as ratio analysis. A
ratio is a mathematical relationship between two or more items taken from the financial
statements. Ratio analysis is the process of computing, determining, and presenting the
relationship of items. It also includes comparison and interpretation of ratios and using them
as basis for the future projections. Ratio analysis is helpful to management and outsiders to
diagnose the financial health of a business concern. It helps in measuring the profitability,
solvency and activity of a firm.

A) LIQUIDITY RATIO

Liquidity refers to the ability of the concern to meet its current obligations as and
when these become due. These ratios measure short term solvency of a firm.
1. Current ratio: The ratio of current assets to current liabilities is called „current ratio‟.
Current ratio indicates the ability of a concern to meet its current obligations as and when
they are due for payment.
2. Liquid ratio: This ratio is also called „quick ‟or ‟acid test‟ ratio. It is calculated by
comparing the quick assets with current liabilities.
3. Absolute liquidity ratio: This ratio is also called „super quick ratio‟ or „cash position
ratio‟. This is a variation of quick ratio. This ratio is calculated when liquidity is highly
restricted in terms of cash and cash equivalents.

B) PROFITABILITY RATIOS

Ability to make maximum profit from optimum utilisation of resources by a business

concern is termed as “profitability”. Profit is an absolute measure of earning capacity of the
firm.
1. Gross profit ratio: This ratio is also known as gross margin or trading margin ratio. It
indicates the difference between sales and direct costs. It explains the relationship between
gross profit and net sale.
2. Net profit ratio: This ratio is also called as net profit to sales ratio. it is a measure of
management’s efficiency in operating the business successfully from the owner’s point of
view.it indicates the return on shareholder’s investments. Higher the ratio better is the
operational efficiency of the business concern.

PROFIT AND LOSS A|C OF ITC LTD:

BALANCE SHEET STATEMENT OF ITC LTD :
 DATA ANALYSIS FOR 2 YEARS 2021 TO 2022
1) LIQUIDITY RATIO :
1.) CURRENT RATIO FOR MAR 2021
1) Current Ratio = Current Asset
----------------------
Current Liabilities
Current Asset = current investment + inventories + trade receivables + cash and cash
Equivalents + short term loans and advances + other current asset
Current Liability = short term borrowings + trade payables + other current liabilities + short term
provision
= 14,046.71+9,470.87+2,090.29+4,001.53+2.77+2,203.07
 0.35+4,119.31+5,885.24+169.05
= 31,815.24
10,173.95

CURRENT RATIO = 3.12:1

CURRENT RATIO FOR MAR 2022

2) Current Ratio = Current Asset
----------------------
Current Liabilities
Current Asset = current investment + inventories + trade receivables + cash and cash
Equivalents + short term loans and advances + other current asset
Current Liability = short term borrowings + trade payables + other current liabilities + short term
provision
= 11,624.95+9,997.77+1,952.50+3,877.94+5.73+3,483.12
0.74+4,223.40+7,198.35+55.60
= 30,942.01
11,478.09

CURRENT RATIO = 2.69:1

Interpretation : The Current ratio for 2021 is 3.12 and the Current ratio for 2022 is 2.69

2.) LIQUID RATIO FOR MAR 2021

1) Liquid Ratio = Liquid Asset
----------------------
Current Liabilities
Liquid Asset = CA- (stock + prepaid exp)
Current . L
LR = 31,815.24-9,470.87
10,173.95
LA = 2.19:1
Liquid Ratio = 2.19:1

LIQUID RATIO FOR MAR 2022

2) Liquid Ratio = Liquid Asset
----------------------
 Current Liabilities
Liquid Asset = CA- (stock + prepaid exp)
Current liabilities
LR = 30,942.01-9,997.77
11,478.09
Liquid Ratio = 1.84:1
Interpretation : The Liquid ratio for 2021 is 2.19 and the Liquid ratio for 2022 is 1.84

3) ABSOLUTE LIQUID RATIO FOR MAR 2021

1) Absolute Liquid Ratio = Absolute Liquid Asset

--------------------------------
Current Liabilities
Absolute Liquid Asset = cash in hand + cash at bank + short term investment
CL
= 4,001.53+2.77+14,046.71
10,173.95

A.L.R = 1.42:1

ABSOLUTE LIQUID RATIO FOR MAR 2022

2) Absolute Liquid Ratio = Absolute Liquid Asset
--------------------------------
Current Liabilities
Absolute Liquid Asset = cash in hand + cash at bank + short term investment
CL
= 3,877.94+5.73+11,624.95
11,478.09

A.L.R = 1.35:1

Interpretation : The Absolute liquid ratio for 2021 is 1.42 and the Absolute Liquid ratio for
2022 is 1.35
 4) GROSS PROFIT RATIO FOR MAR 2021
1) Gross Profit Ratio = Gross Profit
----------------------------- * 100
Revenue from Operations
GP = total revenue – cost of materials consumed
Revenue from operations
= 51,905.34 – 13,939.84 *100
48,952.81
= 37,966.34 *100
48,952.81
G.P.R = 77.5 : 1

GROSS PROFIT RATIO FOR MAR 2022

2) Gross Profit Ratio = Gross Profit
----------------------------- * 100
Revenue from Operations
GP = total revenue – cost of materials consumed
Revenue from operations
= 62,504.44-16,399.94 *100
60,081.36
= 46,104.5 *100
60,081.36
G.P.R = 76.7 : 1
Interpretation : The Gross profit ratio for 2021 is 77.5 and the Gross profit ratio for 2022 is
76.7

5) NET PROFIT RATIO FOR MAR 2021

1) Net Profit Ratio = Net profit for the period

---------------------------------------- *100
Revenue from operations
= 13,389.80 *100
48,952.8
= 27.3 : 1
 NET PROFIT RATIO FOR MAR 2022
2) Net Profit Ratio = Net profit for the period
---------------------------------------- *100
Revenue from operations
= 15,485.55 *100
60,081.36
= 25 : 1

Interpretation : The Net profit Ratio for 2021 is 27.3 and the Net profit ratio for 2022 is 25